Sri Lanka to work with IMF to resolve country's worsening economic crisis: President Gotabaya Rajapaksa

Sri Lanka to work with IMF to resolve country's worsening economic crisis: President Gotabaya Rajapaksa
Sri Lanka's President Gotabaya Rajapaksa (C) addresses the nation along with Navy Chief Nishantha Ulugetenne (2L) and Airforce Chief Sudarshana Pathirana (R) during the Sri Lanka's 74th Independence Day celebrations in Colombo on February 4, 2022. (Photo: Ishara S. Kodikara/AFP

Colombo: Sri Lanka will work closely with the IMF to resolve the worsening economic crisis that has caused acute shortages of essentials, power cuts and long fuel queues in the island country, President Gotabaya Rajapaksa said in an address to the nation on Wednesday.

Rajapaksa said the government was trying hard to resolve the existing crisis that has been triggered due to shortage of foreign exchange.

The Sri Lankan government will work with the IMF to resolve the ongoing economic crisis in the country, Rajapaksa said.

$6.9 billion will have to be paid in loan instalments and sovereign bonds this year and after the payment Sri Lanka will be left with a deficit of $11.9 billion, he added.

President Rajapaksa's televised address came a day after Sri Lanka's Finance Minister Basil Rajapaksa gave the nod to seek assistance from the International Monetary Fund (IMF), softening then country's resistance against the international lender as it desperately tries to salvage the country's beleaguered economy that is currently reeling under a severe foreign exchange crisis.

President Rajapaksa during his address also outlined the island's external debt commitments. He said the root cause of current issues is the foreign exchange crisis.

The projected export earnings for this year is $12 billion.. According to the data of the last two months, we have to bear $22 billion as the import cost this year. Accordingly, this will result in a trade deficit of $10 billion, he said.

He said Sri Lanka will receive about $3 billion from tourism, export services such as information technology, and $2 billion from remittances from expatriate workers.

Rajapaksa referred to the ongoing chaotic situation prevailing with shortages of essentials, power cuts and fuel queues

"I am well aware of the shortages of essential items and increase in prices. I am also aware of issues such as gas shortage, fuel shortage and power cuts. I am also very sensitive to the many sufferings the people have to experience over the past two months. I know that this situation will continue for reasons beyond our control though we make maximum possible efforts with regard to these situations," he said.

In recent weeks the public anger with the crisis had turned into a campaign calling for his resignation.

On Tuesday, the main opposition SJB held a well attended public protest rally against the government opposite the presidential secretariat.

They accused the Rajapaksa government of economic mismanagement. Meanwhile, Finance Minister Rajapaksa left for New Delhi on Tuesday to sign a fresh bailout package with India for USD 1 billion dollars.

The credit line is expected to fund the country's fuel, food and medicine imports, the finance ministry said.

Last month, Sri Lanka purchased 40,000 metric tonnes of diesel and petrol from India's oil major Indian Oil Corporation to meet the urgent energy requirements in the economic crisis worsened by depleted foreign reserves.

Sri Lankan Finance Minister calls on PM Modi

Meanwhile, Indian Prime Minister Narendra Modi on Wednesday conveyed to visiting Sri Lankan Finance Minister Basil Rajapaksa that India would always stand with the island nation as it occupies a central role in New Delhi's 'neighbourhood first policy'.

Sri Lanka is expecting a $1 billion Line of Credit (LOC) from India to tide over its economic crisis and a pact on the additional financial assistance is likely to be finalised on Thursday, people familiar with the developments said.

The Ministry of External Affairs (MEA) said Rajapaksa briefed Modi on initiatives being taken by both countries to increase bilateral economic cooperation, and conveyed his thanks for the support extended by India for the Sri Lankan economy.

Modi and Rajapaksa also had a "comprehensive discussion" on the complex fishermen issue and agreed on the urgent need to find a lasting solution, according to the Sri Lankan High Commission.

There have been frequent attacks on Indian fishermen by the Sri Lankan Navy and it has remained a sticky issue.

"The prime minister spoke about the central role that Sri Lanka occupies in India's 'neighbourhood first' policy and its SAGAR (Security and Growth for all in the Region) doctrine. He reiterated that India would continue to stand with the friendly people of Sri Lanka," the MEA said.

Last month, India extended a $500 million line of credit to Sri Lanka to help it purchase petroleum products as the island nation has been reeling under a severe foreign exchange and energy crisis.

"Had a good meeting with Sri Lanka's Finance Minister @RealBRajapaksa. Glad to see our economic partnership strengthen and investments from India grow," Prime Minister Modi tweeted.

Rajapaksa called on Modi during which he thanked the prime minister for all the assistance that India has provided to Sri Lanka at this "critical time", the Sri Lankan High Commission said.

"Prime Minister of India Narendra Modi stated that India would always stand with Sri Lanka, a close friendly neighbour, when the visiting Sri Lankan Finance Minister Basil Rajapaksa called on him this afternoon," the High Commission said in a statement.

It said Modi and Rajapaksa discussed a wide range of issues pertaining to bilateral ties including in areas of agriculture, renewable energy, tourism and fisheries.

"The two dignitaries also agreed that cooperation in the development of renewable energy in Sri Lanka is mutually beneficial and should be pursued with vigour," the high commission said.

It said that Modi and Rajapaksa recognised the "complex and multidimensional" aspects of the fishermen issue.

"Prime Minister Modi and Minister Rajapaksa had a comprehensive discussion on the fisheries issue between the two countries and recognised its complex and multidimensional aspects including humane treatment of fishermen, livelihood, enforcement, ecology of the ocean, early release of arrested fishermen and their boats, etc," it said.

"The two dignitaries also agreed on the urgent need to find a lasting solution to this complex issue," it added.

The MEA, in its statement, said Rajapaksa noted the deepening people-to-people relations between both countries, including in the cultural sphere.

"The prime minister pointed to the potential for increasing tourist flows, including through the joint promotion of Buddhist and Ramayan tourism circuits," it said.

In the evening, Foreign Secretary Harsh Vardhan Shringla called on Rajapaksa.

"FS @harshvshringla called on the visiting Finance Minister @RealBRajapaks of Sri Lanka. Discussed bilateral economic & commercial cooperation & opportunities post-pandemic. Sri Lanka is integral to our #NeighbourhoodFirst policy. India will always be a reliable partner for Sri Lanka," MEA Spokesperson Arindam Bagchi tweeted.

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