Washington, United States—The International Monetary Fund is ready to discuss “options” with Sri Lanka if the government asks for financial support, its mission chief for the island told AFP on Thursday.
The COVID-19 pandemic has had a disastrous impact on Sri Lanka’s economy, which has been deprived of its tourism bonanza while workers’ remittances from abroad have fallen sharply.
“While the IMF has not received a request for financial support from Sri Lanka, the staff stands ready to discuss options if requested,” mission chief Masahiro Nozaki said in a written statement to AFP.
On Wednesday, Sri Lanka’s finance minister announced the country had sought advice from the fund and was considering seeking an international bailout.
This “referred to an ongoing technical assistance mission by the IMF,” Nozaki said Thursday.
“The mission aims to strengthen the Macro Fiscal Unit at the Ministry of Finance and focuses on training staff at the Unit, as part of our capacity development activities,” he added.
“The mission is being conducted virtually until February 9,” he said.
The IMF continues to “closely monitor economic and policy developments in Sri Lanka,” Nozaki added.
He said a fund team had visited Colombo in December last year as part of the annual bilateral discussions to review economic developments and policies.
A board meeting will be held at the end of February to review the latest economic data from the country.
Meanwhile, Sri Lanka was handed temporary relief from energy shortages and rolling blackouts on Wednesday with a $500-million loan from India to finance urgent oil purchases for the cash-strapped nation.
The island’s economic woes have left thermal power generators unable to keep the lights on and disrupted transport networks, as traders run desperately low on foreign currency to fund imports.
Frequent breakdowns at a huge coal power plant have compounded unannounced electricity cuts and households are also struggling to source cooking gas and kerosene.
Officials said a formal agreement was being signed on Wednesday after two weeks of talks, in addition to a recent $915 million in foreign exchange support.
An Indian diplomat said talks were underway on another $1-billion credit line to fund urgently needed food and medicine imports from India.
“The $500 million is for Sri Lanka to purchase petroleum products from Indian suppliers,” the official said.
Sri Lanka’s economy is also seeing a scarcity of rice, automotive parts and cement, with supermarkets forced to ration some staple foods.
The shortages pushed food inflation to a record 25 percent last month.
Tourism is a key foreign exchange earner for Sri Lanka but the sector has collapsed in the wake of the COVID-19 pandemic.
The government has shut overseas diplomatic missions to save money and a broad ban on imports has been in effect for nearly two years to conserve foreign currency.
Three international rating agencies have downgraded the island since late last year on fears it may not be able to service its $35 billion sovereign debt.
