Dollar strapped Sri Lanka is now trying persuade India Japan, Singapore or some other donor agency to obtain a bridge finance loan amounting to US$ 850 million to survive until the receiving of executive board approval for $2.9 billion IMF bailout before beginning to rebuild usable foreign reserves next year, finance ministry sources disclosed.
Sri Lanka could get as much as $ 6-8 billion in “bridge financing” from India Japan and Singapore and talks are underway with those donor countries to get funds for a short period of six months
It has obtained foreign financing of $ 1.87 billion by entering into 8 agreements with foreign development partners and lending agencies in the first nine months of 2022, finance ministry data shows.
The government will have to manage imports with available foreign exchange inflows instead of bridging finance if it is not forthcoming, state finance minister Shehan Semasinghe said.
Negotiations are now underway with donor countries and international financial agencies to reach agreement on foreign fund mobilization for 2023 considering it as an emergency matter, he revealed.
Japan and India have both responded well for foreign exchange mobilization and debt restructuring while Japan is likely to agree on bridge financing and all of these issues have been conveyed to the President, minister Semasinghe confirmed.
The World Bank and ADB have already informed its inability on lending to Sri Lanka until debt is made sustainable and the macro-fiscal stability is restored but the two agencies are considering alternate ways to assist Sri Lanka he disclosed.
The World Bank this week approved Sri Lanka’s request to access concessional financing from the International Development Association (IDA).
This type of financing, will enable Sri Lanka to get IDA loan facility at low interest rates, to implement economic reform programme to stabilize the economy and protect the livelihood of millions of people facing poverty and hunger, he added.
Eight member Presidential committee is negotiating debt restructuring with China and India and the outcome so far was positive senior finance ministry official divulged.
The members of the committee are Minister of Foreign Affairs Ali Sabry, State Minister of Finance Shehan Semasinghe, Chief of Staff Sagala Ratnayake, Presidential Secretary Saman Ekanayake, Presidential Economic Adviser Dr.R.H.S. Samaratunga, Treasury Secretary Mahinda Siriwardena, Central Bank Governor Dr. Nandalal Weerasinghe and former Governor Indrajit Coomaraswamy.
He said ‘World Bank, ADB and the small amount of IMF debt would not be restructured. If it were to be restructured, those institutions could stop their operations in Sri Lanka, and even their financing in the pipeline may not be disbursed.”
