Sri Lanka’s finance minister said on Friday that India and the World Bank are considering expanding about $2 billion in bridge financing so it can continue essential imports.
The country of 22 million is struggling to pay for imports after a sharp drop in foreign exchange reserves that led to a devaluation of the currency and soaring inflation.
Sri Lanka, which has $51 billion in external credit, is working on a broader plan to secure funds to help it through its worst economic crisis, with protracted power cuts and shortages of fuel and medicine that have sparked nationwide protests.
The government has asked a number of creditors to restructure its debt and has requested assistance from China, Japan and the Asian Development Bank, Ali Sabry said.
India has already agreed to double an existing $500 million credit line for fuel and delay about $1.5 billion in import payments that Sri Lanka must make to the Asian Clearing Union. It has also extended the term of a $400 million swap given in January, the Indian High Commission said Friday.
“Talks with the World Bank have also been very positive,” said Sabry, adding: “Over the next four weeks to six months, we expect about $500 million from them, which will be used in part to provide direct money transfers to the poor. .”
Sabry leads a Sri Lankan delegation in Washington to negotiate a program with the International Monetary Fund (IMF). He said talks had begun on an Extended Fund Facility (EFF), but Sri Lanka would need $3 to $4 billion in bridge funding until a program is completed.
“We have a three-pronged strategy. One is to kick-start an IMF programme, second to secure bridging funding and third to get Sri Lanka back on the growth path within a year or so,” he said. .
Sabry said the government hopes to appoint financial advisers and an international law firm in the next 10 to 15 days to begin formal debt negotiations with creditors.
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