IMF team in Sri Lanka to discuss island's worsening economic crisis

COLOMBO • A delegation from the International Monetary Fund (IMF) was in Sri Lanka yesterday for talks on the island's worsening economic crisis, with the public suffering months of food, fuel and medicine shortages.

A lack of foreign currency has left traders unable to pay for vital imports in what the authorities concede is the South Asian nation's worst financial crisis since independence from Britain in 1948.

Long queues at petrol stations and blackouts have become the norm, while record inflation has caused hardship among the island's 22 million people by repeatedly pushing up the cost of groceries, transport and medicines.

A senior IMF staff member "will hold talks" with President Gotabaya Rajapaksa and his brother, Finance Minister Basil Rajapaksa, a spokesman for the leader told Agence France-Presse.

Sri Lanka's government is divided on seeking a bailout, but the international lender said it was "ready to discuss options if requested" in a statement yesterday. The IMF warned earlier this month that the nation's US$51 billion (S$70 billion) foreign debt was "unsustainable", and urged a currency devaluation and higher taxes to revive its almost bankrupt economy.

Sri Lanka last week allowed the rupee to float, a move that saw the currency nosedive 25 per cent against the US dollar and triggered a fresh wave of price increases.

Fuel costs have risen by nearly 80 per cent since early February while food prices rose by a quarter according to January figures.

And the Covid-19 pandemic has hammered the tourism sector - a key foreign exchange earner.

Sri Lanka needs nearly US$7 billion to service its foreign debt this year, but the country's external reserves at the end of January were just over US$2 billion - enough to finance one month of imports.

International ratings agencies have downgraded Sri Lanka over expectations that it may not be able to repay its borrowings.

AGENCE FRANCE-PRESSE