Sri Lanka is in talks with bondholders to avoid default and is also now considering discussing a deal with the International Monetary Fund (IMF), Finance Minister Basil Rajapaksa has said.
He told the London Financial Times that Sri Lanka is looking at all options to avoid default and alleviate the economic crisis.
“We have [international sovereign bonds] which we have to repay back, so we are negotiating with them. Then we have creditors and we have to service their debt, so whether we can have an adjustment or some type of thing,” he said.
Rajapaksa added that the Government would “think about a programme with the IMF . . . All those discussions are going as well.”
The Government had recently said that it is unlikely to seek a bailout from the IMF.
Most members of the Cabinet did not seek financial support from the IMF.
A majority in the Cabinet are against the pre-conditions expected to be proposed by the IMF for the funding.
IMF’s mission chief for Sri Lanka, Masahiro Nozaki had stated in late December that the staff is still ready to discuss the option if requested.
Nozaki said a staff team from the IMF visited Colombo from December 7–20 to conduct the 2021 Article IV consultation with Sri Lanka.
Meanwhile Sri Lanka’s Central Bank Governor Ajith Nivard Cabraal told CNBC recently that the South Asian nation doesn’t need an economic lifeline from the International Monetary Fund.
“Well, we don’t need relief if we have an alternative strategy,” he said d on CNBC’s “Squawk Box Asia” on Monday.
He claimed Sri Lanka is able to finance its outstanding debt, especially international sovereign bonds, “without causing any pain to our creditors.”
Credit agencies have recently warned Sri Lanka may need support to cushion the blow from inflation and foreign exchange headwinds, but Cabraal disagreed with that assessment.
He argued the government does not need to approach the IMF, especially if it is successful in finding government-to-government as well as central bank solutions in the short term.
“And we have a strategy to change that into something a lot more sustainable in the next one year or two,” Cabraal said.
Earlier this month, S&P Global Ratings downgraded Sri Lanka from CCC+ to CCC with a negative outlook, indicating the country’s increasing financial vulnerability.