Sri Lanka now needs US$ 5 billion from the international donar countries and agencies to avert current economic turmoil and the crisis could have been avoided if it had gone to the International Monetary Fund (IMF) for a bailout sooner, the country’s Central Bank Governor said.
Central Bank Governor P Nandalal Weerasinghe noted that the delay in seeking outside help was a mistake.Sri Lanka defaulted on its foreign debt for the time in its history last month.
“If the government had taken the decision to go to the IMF earlier, and if it started the debt resettlement process one year before, Sri Lanka could have managed the situation without this kind of suffering in this country,” he said.
His comments came as he is attempting to restore order to Sri Lanka’s economy, which is experiencing extreme fuel shortages, soaring food prices and a lack of medicines.
A recent survey by the United Nations World Food Programme found that around two thirds of Sri Lankan households have been forced to reduce their food intake.
Mr Weerasinghe said Sri Lanka was experiencing its worst economic crisis since independence from Britain in 1948.
A team from the IMF is due to arrive in Colombo for talks on Monday and Mr Weerasinghe will be a key participant in those meetings.
Yet there is uncertainty about whether Mr Weerasinghe will be reappointed for a full six year term at the end of this month. But he said that he has expressed his desire to continue.
A complication in the IMF negotiations is Sri Lanka’s substantial borrowing from China, which Mr Weerasinghe said accounts for 15% of the country’s total external debt.
The fund has a policy of not bailing out countries unless all its other creditors have first agreed to write down their loans.
“I’m sure China as a good friend of Sri Lanka [will] offer similar relief that will be offered by other creditors as well,” said Mr Weerasinghe.
Former Sri Lanka central bank staff have written an open letter to the embattled President Gotabaya Rajapaksa urging him to keep Mr Weerasinghe in the post.
“If anyone is contemplating to remove him from his position as the Governor of the Central Bank of Sri Lanka, we see it as a highly unpatriotic move with entirely ulterior motives,” they wrote.
The World Bank has warned that as many as 12 other developing countries are at risk of default over the coming year.
Analysts say states such as the Maldives, Rwanda, Ethiopia, Senegal are also all on the financial brink.Egypt, Ghana and Pakistan are also seen as intensely vulnerable.
