Sri Lanka seeks to secure $5 billion in import payment funds

Ranil Wickremesinghe, newly appointed Prime Minister, arrives at a Buddhist temple after his swearing-in ceremony amid the country’s economic crisis in Colombo, Sri Lanka May 12, 2022. REUTERS/Dinuka Liyanawatte

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COLOMBO, June 2 (Reuters) – Sri Lanka is aiming to secure around US$5 billion in financing this year to cover repayments on fuel imports and other items purchased through credit lines, and another US$1 billion to help to strengthen its foreign exchange reserves, the prime minister’s office said on Thursday.

The island nation is grappling with its worst financial crisis in over seven decades, with a severe foreign exchange shortage making it difficult to pay for essential imports such as food, fuel, fertilizer and medicines.

Sri Lanka’s foreign exchange reserves were $1.81 billion in April.

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Prime Minister Ranil Wickremesinghe, who took office last month after mass protests forced the resignation of his predecessor, has hiked taxes to prop up government revenues and plans to slash spending in an interim budget due to be presented within weeks to shorten. Continue reading

Sri Lanka is also negotiating a rescue package with the International Monetary Fund that could potentially allow it to borrow at least $3 billion through the lender’s expanded fund facility. Continue reading

“He explained that talks with the IMF were ongoing and hoped the negotiations would be finalized by the end of the month,” Wickremesinghe’s office said in a statement, referring to a discussion between the prime minister and local chambers of commerce.

Wickremesinghe said any bridge financing would be conditional on Sri Lanka reaching an agreement with the IMF, the statement added.

So far, Sri Lanka has secured two US$1.5 billion credit lines from India for fuel and essential imports. The neighbors are also in talks for another $500 million line of credit to fund fuel imports.

Sri Lanka is also asking for help from other countries, including Japan, which has long-standing trade ties with the island nation. However, relations with Tokyo, which was also a major lender to Sri Lanka, cooled after Sri Lanka canceled a $1.5 billion light rail project in 2020 that was expected to be largely funded by Japan.

“He (Wickremesinghe) added that ties with Japan had broken down and it would take time to restore those ties and regain their trust,” the prime minister’s office said in a statement.

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Reporting by Uditha Jayasinghe, editing by Devjyot Ghoshal and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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