Sri Lanka urged to leverage IMF resources to shore up its economy

With Sri Lanka reluctant to take the International Monetary Fund’s bailout option to tide over its debt repayment crisis, a top US diplomat has advised Colombo to leverage the resources of the global lending agency to build for itself a firmer economic foundation

Aug 30, 2021
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 Sri Lanka - IMF

With Sri Lanka reluctant to take the International Monetary Fund’s bailout option to tide over its debt repayment crisis, a top US diplomat has advised Colombo to leverage the resources of the global lending agency to build for itself a firmer economic foundation. US Ambassador to Sri Lanka Alaina B. Teplitz said she was continuing to urge the sri Lankan government to leverage the resources of the IMF (International Monetary Fund) as a member state and take advantage of the tools that can come to assess the country’s economic performance.

In an interview with Daily Mirror, she said she would urge the Sri Lankan government how to engage in changes that would build a much firmer economic foundation.

Commenting on her recent meeting with Finance Minister Basil Rajapaksa, the ambassador said she discussed some of the challenges facing investors.

“I’d like to see Sri Lanka attract high-quality investors, and of course expressed that view to the Finance Minister,” she said.

Faced with a rising debt burden and fast depleting foreign exchange reserves, Sri Lankan economy has been causing concern both domestically and internationally.

Teplitz said she shared with the finance minister about concerns surrounding the Sri Lankan economy.

“It’s not in the best of health at the moment. It’s very difficult times globally because of the pandemic and of course I believe that part of the solution is for Sri Lanka to utilize the resources presented by the International Monetary Fund, or the IMF,” she said.

Media reports said Sri Lanka has sought suppliers’ credit facilities from the United Arab Emirates and Iran through diplomatic channels, as money printing is creating forex shortages and depleting forex reserves.

The Sri Lankan central bank has been reluctant to seek IMF assistance to honor its International Sovereign Bond obligations apart from generally rescuing the economy badly hit by worsening macroeconomic conditions exacerbated by the raging Covid-19 pandemic.

The Sri Lankan media outlet Daily Financial Times quoted economist W.A. Wijewardane as saying in an article: “The present severely acute crisis was not totally unanticipated. It was a gradual deterioration from around 2013 and independent economic analysts had warned the governments in power about its dire consequences.”

However, this is not the first time that Sri Lanka is facing difficulties in the external economy. It earlier sought IMF bailout assistance on 16 occasions.

While some experts have argued that an IMF bailout package was the only solution for Sri Lanka as its economy would get a breathing space to establish economic stability, others have cited the failure of the earlier 16 bailouts to buttress their arguments against turning to the lending agency again.

(SAM)