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Sri Lanka seeks $4 billion aid from IMF amid economic crisis. Top updates

Protestors take part in a demonstration against the economic crisis at the entrance of the president's office in Colombo. Sri Lanka's 22 million residents have seen weeks of power blackouts and severe shortages of food, fuel and even life-saving medicine in the country's worst downturn since independence in 1948.  (AFP)Premium
Protestors take part in a demonstration against the economic crisis at the entrance of the president's office in Colombo. Sri Lanka's 22 million residents have seen weeks of power blackouts and severe shortages of food, fuel and even life-saving medicine in the country's worst downturn since independence in 1948.  (AFP)

  • Sri Lanka is also looking at bridge financing options, and is confident it can secure aid from countries including China and India

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Sri Lanka needs between $3 billion to $4 billion this year to pull itself out of an unprecedented economic crisis and plans to start talks with the International Monetary Fund for help, Finance Minister Ali Sabry said, according to Bloomberg report.

The island nation is looking at making a “decent case" before the IMF to help preserve the economy, he said in an interview to Bloomberg Television’s Yvonne Man and David Ingles. Sabry said talks are scheduled to begin in Washington on April 18 and he expects emergency relief funds a week later, if things go well.

Here are the key highlights for this big story on Thursday:

The IMF’s involvement should help negotiations with bond holders, Citigroup Global Markets analysts Donato Guarino and Johanna Chua wrote in a note to clients. They see Sri Lanka asking investors to take a haircut of 50% on interest payments, and 20% on the principal, with an exit yield of 11%, as per Bloomberg report.

Meanwhile, Sri Lanka is looking at bridge financing options, and is confident it can secure aid from countries including China and India. India's External Affairs Minister S Jaishankar on Wednesday said that India and the US discussed different issues of Indian subcontinent countries like Sri Lanka, Myanmar, Pakistan and Nepal.

Jaishankar, who held a series of high-level meetings during his visit to the United States for the 4th edition of India-US Ministerial 2 2 Dialogue in Washington, said, "There was interest, completely understandably, on some developments in the Indian subcontinent. We discussed the main difficulties in Sri Lanka, the big changes in Pakistan, there was a little bit of discussion on what all has recently happened in Nepal, Myanmar." 

Inflation is at an all-time high of 17.5%, with prices of food items such as a kilogram of rice soaring to 500 Sri Lankan rupees (A$2.10) when it would normally cost around 80 rupees (A$0.34). Amid shortages, one 400g packet of milk powder is reported to cost over 250 rupees (A$1.05), when it usually costs around 60 rupees (A$0.25).

On April 1, President Gotabaya Rajpaksha declared a state of emergency. In less than a week, he withdrew it following massive protests by angry citizens over the government’s handling of the crisis.

The country relies on the import of many essential items including petrol, food items and medicines. Most countries will keep foreign currencies on hand in order to trade for these items, but a shortage of foreign exchange in Sri Lanka is being blamed for the sky-high prices.

(With inputs from agencies)

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