IMF says it held 'fruitful' technical talks with Sri Lanka on loan request

WASHINGTON: The International Monetary Fund said on Saturday that its staff held “fruitful technical discussions” with Sri Lankan authorities on the crisis-wracked country’s request for an IMF-supported loan program this week.

The Fund said in a statement that the discussions included the need for Sri Lanka to implement “a credible and coherent strategy” to restore macroeconomic stability, and to strengthen its social safety net and protect the poor and vulnerable during the current crisis.

“The IMF team welcomed the authorities’ plan to engage in a collaborative dialogue with their creditors,” IMF Sri Lanka mission chief Masahiro Nozaki said in a statement.

The debt-burdened island country of 22 million people is struggling to pay for imports after a sharp drop in foreign exchange reserves has helped fuel soaring inflation. Prolonged power cuts and shortages of fuel and medicines have sparked nationwide protests.

Sri Lankan Finance Minister Ali Sabry and new central bank governor P. Nandalal Weerasinghe have spent this week in Washington talking to the IMF, the World Bank, India and other countries about financing help for the country, which is already saddled with $51 billion in external debt.

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Sabry told reporters on Friday that the talks with the Fund were focused on a more traditional Extended Fund Facility program, but that $3 billion to $4 billion in bridge financing was needed while this could be finalized.

The IMF has said that Sri Lanka’s debt needs to be put on a sustainable path before it could make new loans to Colombo — a process that could require lengthy negotiations with China and the country’s other creditors.

Sabry said on Friday that Sri Lanka is discussing with India some $1.5 billion in bridge financing to help continue essential imports, and is discussing with the World Bank a $500 million package to help provide cash transfers to the country’s poor. Sri Lanka also has approached China, Japan and the Asian Development Bank for help, he said.