Sri Lanka will begin negotiations with the IMF today as it seeks a cash infusion of some $4 billion to
Sri Lanka will begin negotiations with the IMF today as it seeks a cash infusion of some $4 billion to pay for food and fuel imports as well as service debts.
The country currently faces one of its worst economic crises in decades. It has a total outstanding debt of $50 billion, $7 billion of which is due this year.
The current foreign exchange crisis has been looming since late 2020, when the government nearly depleted its foreign reserves to keep up with essential imports during the COVID-19 lockdown. As of last week, the Sri Lankan government has halted payments on its foreign debt to preserve its ability to import necessary goods.
The meeting with the IMF will likely address Sri Lanka’s domestic economic woes in the short term and most importantly, aid Sri Lanka with haircut negotiations on the country’s foreign debt. While Sri Lanka is currently negotiating for a $1.5 billion credit line with China, India has extended a $500 million credit line, which will further entrench the country’s dependence on its neighbors.