Sri Lanka asks IMF to revive USD1.5-billion bailout

COLOMBO (AFP) – Sri Lanka has appealed to the International Monetary Fund (IMF) to revive a USD1.5-billion bailout suspended during the island nation’s political crisis late last year, the Finance Ministry said yesterday.

In October, President Maithripala Sirisena sparked weeks of high political drama, even featuring brawls in Parliament, by sacking Ranil Wickremesinghe as prime minister and dissolving the legislature.

Courts and the Parliament subsequently held that the president’s actions were unconstitutional and restored the status quo after more than seven weeks of upheaval that alarmed the international community.

The crisis prompted three international credit rating agencies to downgrade Sri Lanka and the IMF to suspend its bailout programme – that began in 2016 – just as it was about to disburse another instalment.

Sri Lanka’s Finance Ministry said in a statement the request to revive the bailout was made during talks between Finance Minister Mangala Samaraweera and IMF chief Christine Lagarde in Washington last Tuesday.

A Sri Lankan delegation made the request “with a view to stabilising the economy” after the country’s political “disruptions”, it said.

Meanwhile, the IMF said it would send a team to Colombo next month to discuss resuming assistance.

Weeks of high political drama were sparked in Sri Lanka with the dismissal of Prime Minister Ranil Wickremesinghe in October. – AFP

“We discussed the challenging economic environment and the policy priorities for the country,” it said in a statement quoting Lagarde.

“The IMF remains ready to support the Sri Lankan authorities in these endeavours and an IMF team is scheduled to visit Colombo in mid-February to resume programme discussions.”

Wickremesinghe told Parliament last week that his shock dismissal on October 26 was a “coup” and a “death blow” to the economy. Sri Lanka will have to repay a record USD5.9 billion this calendar year, he added.

The Washington-based fund has been urging Colombo – which is emerging from a balance of payments crisis – to conserve its foreign exchange reserves and ensure economic reforms.

Last year, the IMF warned that Sri Lanka was vulnerable to shocks from at home and abroad and stressed that restructuring the island’s loss-making national airline and reforming its energy sector were vital.

One of the biggest drags on the country’s balance sheet is national carrier SriLankan, which has accumulated losses and debts of over USD2 billion and is a huge burden on taxpayers.

The government has failed to privatise the airline, but the president last week appointed another committee to restructure the loss-making carrier.

Sri Lanka hopes to raise USD1 billion from the international debt market, another USD500 million from China and Japan and a further USD400 million from India.