Latest update November 26th, 2024 1:00 AM
Stifled by debt, Sri Lankans want leaders ousted for ‘loan crimes’
Kaieteur News – The island nation of Sri Lanka is in the midst of one of the worst economic crises it has ever seen. It has just defaulted on its foreign debts for the first time since its independence, and the country’s 22 million people are facing crippling 12-hour power cuts and an extreme scarcity of food, fuel and other essential items, such as medicines.
Even as the debt piles up, Sri Lanka looks to International Monetary Fund (IMF) for an immediate bail out.
Sri Lanka has formally handed over its southern port of Hambantota to China on a 99-year lease, which government critics have denounced as an erosion of the country’s sovereignty. (Photo Credit: Associate Foreign Press)
A Sri Lankan delegation heads to Washington, DC, to secure funds, street protests calling for President Gotabaya Rajapaksa and his government to demit office continues.
Sri Lankans protestors have labeled the Rajapaksa regime “loan criminals,” noting that foreign debt led to an inflation which is at an all-time high of 17.5 per cent, with prices of food items such as a kilogram of rice soaring to 500 Sri Lankan rupees (US$1.56) when it would normally cost around 80 rupees (US$0.25).
On April 1, President Gotabaya Rajpaksha declared a state of emergency. In less than a week, he withdrew it following massive protests by angry citizens over the government’s handling of the crisis.
The country relies on the import of many essential items including petrol, food items and medicines. Most countries will keep foreign currencies on hand in order to trade for these items, but a shortage of foreign exchange in Sri Lanka is being blamed for the sky-high prices.
Many believe that Sri Lanka’s economic relations with China are the main driver behind the crisis. The United States has called this phenomenon “debt-trap diplomacy”.
This is where a creditor country or institution extends debt to a borrowing nation to increase the lender’s political leverage – if the borrower extends itself and cannot pay the money back, they are at the creditor’s mercy.
Sri Lanka has granted China a 99-year lease on Hambantota port, which is located along one of the world’s busiest shipping routes.
‘BAIL OUT’
This week a team led by newly appointed Finance Minister Ali Sabry hopes to start talks with the lender of last resort on April 18 and secure aid as early as a week after negotiations.
“We need immediate emergency funding to get Sri Lanka back on track,” Sabry said in an interview with Bloomberg Television on Thursday, while pegging the funding need this year at between $3 billion – $4 billion. “Our appeal to them is to release it as soon as possible.”
Sabry will be joined in the talks by central bank Governor Nandalal Weerasinghe and Treasury Secretary Mahinda Siriwardana, both of whom have had stints with the IMF.
Still, political turmoil at home, with street protests by citizens calling for the ouster of Rajapaksa only make the job of convincing the IMF to lend money more difficult. The $81 billion economy faced $8.6 billion worth of debt obligations this year before it suspended payments on foreign loans to preserve cash to pay for essential food and fuel imports.
Even with officials more amenable to working with the IMF in place, it will be an uphill task for Sri Lanka to raise the kind of funds, Sabry said the country needs to tide over a balance of payments crisis this year.
The last time IMF extended help to Sri Lanka in 2016, the loan was capped at $1.5 billion and the programme was prematurely terminated after disbursing $1.3 billion. That was when the economy was growing at about five percent and tourism accounted for a similar percent of gross domestic product.
In the absence of revenue from tourism, Sri Lanka has in recent times turned to countries, including China and India, for support amid a weak foreign-reserves position. The nation is also in talks with the World Bank and the Asian Development Bank for support, Sabry said.
Sri Lanka’s High Commissioner to India Milinda Moragoda met Finance Minister Nirmala Sitharaman in New Delhi to seek further help for securing food and fuel imports for the island nation, a statement from the high commission said. New Delhi has already provided a $1 billion credit facility to buy food, medicines and other essential items as well as $500 million for fuel imports, since the crisis.
Sri Lanka faces elevated dollar debt payments in coming years.
(www.channelnewsasia.com, https://www.aljazeera.com/economy/2022/4/15/sri-lanka-looks-to-imf-for-a-bail-out)
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