Image: Reuters Berita 24 English - An IMF delegation will arrive in Sri Lanka on Monday to discuss a rescue proposal, but time is running ...
 |
| Image: Reuters |
Berita 24 English - An IMF delegation will arrive in Sri Lanka on Monday to discuss a rescue proposal, but time is running out for a country that is just days away from running out of fuel and months away from receiving any relief funds.
Sri Lanka is in the midst of its biggest financial crisis since its 1948 independence, as decades of economic mismanagement and subsequent policy blunders, along with a tourism and remittances hit by COVID-19, have reduced foreign reserves to record lows.
In April, the 22-million-strong island nation put a stop on payments on a $12 billion debt. The UN has warned that rising inflation, a falling currency, and persistent fuel, food, and medical shortages could lead to a humanitarian crisis.
The IMF team, which is in Colombo till June 30, will continue recent discussions on what would be Sri Lanka's 17th bailout, the IMF said on Sunday.
"In keeping with the IMF's principles, we reaffirm our commitment to support Sri Lanka at this difficult moment," the global lender said in a statement.
Colombo is hoping that the IMF visit, which coincides with debt restructuring talks, will result in a speedy agreement at the staff level and a fast track for IMF board disbursements. However, this can take months, putting Sri Lanka at risk of more shortages and political turmoil.
"Even if a staff-level agreement is reached, final programme approval will be dependant on guarantees that official creditors, particularly China, are willing to offer significant debt relief," said Patrick Curran, senior economist at Tellimer, a financial research business in the United States.
"All things considered, the reorganisation is likely to take a long time."
However, the problem is already overwhelming for ordinary Sri Lankans, such as autorickshaw driver Mohammed Rahuman, 64, who recently waited in line for more than 16 hours for gasoline.
"They say petrol is on the way, but nothing has arrived yet," he told Reuters. "Things are quite challenging. I can't work, go home, or sleep since I'm unable to earn money."
Since last week, kilometer-long lineups have formed outside most gas stations. Schools have been shuttered in metropolitan areas, and governmental employees have been asked to work from home for the next two weeks.
Bondholders anticipate that the IMF visit will clarify how much debt Sri Lanka can repay and what haircuts investors may be forced to take.
"This IMF visit is critical – the country will require all available assistance and support," said Lutz Roehmeyer, portfolio manager at Berlin-based bondholder Capitulum Asset Management. "This will be a crucial prerequisite for many overseas bondholders to come to the table and speak about a debt restructure in the first place."
Prime Minister Ranil Wickremesinghe stated earlier this month that an IMF programme is necessary to obtain bridge funding from the World Bank and the Asian Development Bank.
Lazard and Clifford Chance, Sri Lanka's financial and legal advisors, have representatives in Colombo.
