An International Monetary Fund (IMF) team arrives in Sri Lanka on Monday for talks on a bailout programme, but time is short for a country just days from running out of fuel and likely months from getting any relief money.
Sri Lanka is battling its worst
financial crisis since independence in 1948, as decades of economic
mismanagement and recent policy errors coupled with a hit from COVID-19 to
tourism and remittances, shrivelling foreign reserves to record lows.
The island nation of 22 million people
suspended payment on $12bn in debt in April. The United Nations has warned
soaring inflation, a plunging currency and chronic shortages of fuel, food and
medicine could spiral into a humanitarian crisis.
The IMF team, visiting Colombo through
June 30, will continue recent talks on what would be Sri Lanka’s 17th rescue
programme, the IMF said on Sunday.
“We reaffirm our commitment to support
Sri Lanka at this difficult time, in line with the IMF’s policies,” the global
lender said in a statement.
Colombo hopes the IMF visit,
overlapping with debt restructuring talks, will yield a quick staff-level
agreement and a fast track for IMF board disbursements. But that typically
takes months, while Sri Lanka risks more shortages and political unrest.
“Even if a staff-level agreement is
reached, final programme approval will be contingent upon assurances that
official creditors, including China, are willing to provide adequate debt
relief,” said Patrick Curran, senior economist at US investment research firm
Tellimer.
“All considered, the restructuring is
likely to be a protracted process.”
Outstanding payments
But the crisis is already overwhelming
for average Sri Lankans, like autorickshaw driver Mohammed Rahuman, 64, who was
recently standing in line for gasoline for more than 16 hours.
“They say petrol will come but nothing
yet,” he told Reuters. “Things are very difficult. I cannot earn any money, I
cannot go home and I cannot sleep.”
Lines that snake for kilometres have
formed outside most fuel pumps since last week.
The government declared Friday a
holiday for public offices and schools to curtail vehicular movement, leaving
many roads in and around the capital Colombo deserted.
Minister of Power and Energy Kanchana
Wijesekera said on Thursday that the state-run Ceylon Petroleum Corp hadn’t
received tenders for new stocks of fuel because suppliers were deterred by
outstanding payments.
The Daily News newspaper on Saturday
cited an official circular telling civil servants to work from home for two
weeks.
Bondholders expect the IMF visit to
give clarity on how much debt Sri Lanka can repay and what amount investors can
expect to be paid back.
“This IMF visit is very important –
the country will need every help and support it can get,” Lutz Roehmeyer,
portfolio manager at Berlin-based bondholder Capitulum Asset Management, told
Reuters. “For many international bondholders, this will be a key requirement to
ensure they come to the table and talk about a debt restructuring in the first
place.”
Prime Minister Ranil Wickremesinghe
said this month an IMF programme is crucial to access bridge financing from
sources such as the World Bank and Asian Development Bank.
Representatives from Sri Lanka’s
financial and legal advisors, Lazard and Clifford Chance, are in Colombo.
Source: aljazeera.com