An IMF council was in Sri Lanka yesterday for discussions on the island’s exacerbating economic crisis, with the public undergoing months of food, fuel, and medicine depletion. A scarcity of foreign currency has left dealers unable to expand important imports in what administrations admit is the South Asian nation’s direst financial catastrophe since independence from Britain in 1948.
Extended queues outside gas sites and rolling blackouts have become the norm while soaring inflation has caused severe hardship among the island’s 22 million people by continually pushing up the cost of groceries, carriers, and drugs. A senior worker from the International Monetary Fund “will hold talks” with President Gotabaya Rajapaksa and his brother, finance minister Basil Rajapaksa, a representative for the leader said AFP. Sri Lanka’s government is split on pursuing a bailout, but the international grander told it was “ready to talk about options if requested” in a Monday statement.
The IMF instructed earlier this month that the country’s $51 billion foreign deficit was “unsustainable”, and asked for currency depreciation and higher taxes to renewing its almost broke economy. Sri Lanka last week permitted the rupee to float, a trick that witness the currency plummet 25 percent against the dollar and accelerated a fresh ripple of price upswing.
Fuel expenses have soared by nearly 80 percent since early February while food costs rose sharply by a quarter as per the January charts. The coronavirus pandemic thumped the South Asian island’s tourism sector-a key foreign exchange earner. Sri Lanka requires nearly $7 billion to overhaul its foreign debt this year, but the country’s exterior resources at the end of January were just over $2 billion sufficient to finance one month of imports.
International rating agents have reduced Lanka over expectations it may not be competent to pay back its borrowings, though the government asserts it will.