© Reuters. Protesters chant slogans against Sri Lankan President Gotabaya Rajapaksa near the Presidential Office, amid the country’s economic crisis in Colombo, Sri Lanka, April 9, 2022. REUTERS / Dinuka Liyanawatte
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By Devjyot Ghoshal and Uditha Jayasinghe
COLOMBO (Reuters) – Sri Lanka will need about $3 billion in external assistance over the next six months to help restore supplies of essential goods, including fuel and medicine, to manage a crisis. severe economic crisis, the country’s finance minister said on Saturday.
The island nation of 22 million people has been affected by prolonged power cuts, with medicines, fuel and other goods running low, sending angry protesters into the streets and bringing President Gotabaya Rajapaksa under pressure growing force.
“It’s a Hercule mission,” Finance Minister Ali Sabry told Reuters in his first interview since taking office this week, referring to the search for $3 billion in funding for the bridge when land The country is ready to negotiate with the International Monetary Fund (IMF) this month.
Sri Lanka will review the restructuring of international sovereign bonds and seek a moratorium on payments, and confidently negotiate with bondholders for an upcoming $1 billion payment in July.
“The whole effort is not about defaulting,” says Sabry. “We understand the consequences of a difficult default.”
JP Morgan analysts this week estimated that Sri Lanka’s total debt repayments will top $7 billion this year, with a current account deficit of around $3 billion.
Sri Lanka will seek another $500 million line of credit from India for fuel, enough for about five weeks of claim, Sabry said.
The government will also seek support from the Asian Development Bank, the World Bank and bilateral partners including China, the United States, the United Kingdom and countries in the Middle East.
“We know where we are, and the only thing is to fight back,” said Sabry, looking relaxed in a blue t-shirt and jeans.
“We have no choice.”
Sri Lanka’s foreign exchange reserves were around $1.93 billion at the end of March.
On Friday, a new central bank governor raised interest rates by an unprecedented 700 basis points in a bid to rein in soaring inflation and stabilize the economy.
In an effort to fix the government’s fiscal predicament, Sabry said the country would have to raise tax rates and raise fuel prices further within the next six months.
“These are very uncommon measures, but these are the things we need to do to get the country out of this situation,” he said. “But the choice is you do it, or will you go down the drain permanently?”
