’Only option to emerge from crisis is…’ Sri Lanka President on economic collapse

Crisis-hit Sri Lanka has continued to ask for financial support from major economies and institutions like IMF. Recently, Sri Lankan President Ranil Wickremesinghe said that the only option for the island nation to emerge from this crisis is to seek the support of the global lender International Monetary Fund.

"We are well aware that the economy of the country has collapsed. So I know the difficulties faced by the country. We witnessed a drop in the number of employments. Inflation has especially increased the cost of living. Hence people's lifestyle is changing," said Wickremesinghe during a meeting with the trade union representatives at the President's Office last week.

"These are the repercussions of this economic collapse. It is useless to talk of the root causes for these issues as they have already happened. The only option we have now is to seek the support of the International Monetary Fund (IMF). Otherwise, we cannot recover," he added.

Additinally, the Sri Lankan Presdent concluded debt restructuring talks with Japan and India in order to carve a path out of its worst financial crisis.

The crisis-hit island nation, which is trying to secure a $2.9 billion bridge loan from the IMF, has been trying to get financial assurances from its major creditors — China, Japan and India — which is the requisite for Colombo to get the bailout package.

The IMF bailout has been put on a halt as Sri Lanka pursues talks with creditors to meet the global lender’s condition for the facility.

The president said he was looking forward to the IMF facility in 3-4 tranches.

“I want to lift this country out of the plunge sooner,” he said.

Sri Lanka began debt restructuring talks with its creditors in September last year as warranted by its agreement with the IMF for the $ 2.9 billion facility over four years.

It began negotiating with the IMF for a bail-out after having announced its first-ever sovereign debt default in April last year.

The IMF facility would enable the island nation to obtain bridging finance from markets and other lending institutions such as the ADB and the World Bank.

“We would then recommence by the end of this year several projects that were stalled with Japan,” Wickremesinghe said.

He said there were no quick fixes to the current crisis and Sri Lanka had to be wary of sliding growth in Europe and the US which would have a direct bearing on the country’s exports.

The president’s meeting with trade unions assumes significance in view of hard economic reform measures to be implemented by the government.

Wickremesinghe recently said he was intent on selling the state-owned enterprises to boost reserves. The government has already made clear its plans to privatise Sri Lanka Telecom and Sri Lankan Airlines.

Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves, sparking political turmoil in the country which led to the ouster of the all-powerful Rajapaksa family.

Extending a much-needed lifeline to a neighbour in need, India gave financial assistance of nearly $ 4 billion to Colombo during the year. In January, India announced a $ 900 million loan to Sri Lanka to build up its depleted foreign reserves as the financial crisis began to unfold.

Later, it offered a $ 500 million credit line to Sri Lanka to fund the country's fuel purchases. The credit line was later expanded to $ 700 million due to the sheer gravity of the situation.