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colombo [Sri Lanka]Dec 18 (ANI): Sri Lanka, currently facing an economic crisis, is waiting for the International Monetary Fund (IMF) to formally approve a $2.9 billion bailout package by the end of the year.
Officials from the IMF and Sri Lankan authorities reached a staff-level agreement on Sept. 1 for a 48-month arrangement under an Extended Fund loan of about $2.9 million to support the island nation’s economic policies , the Daily Mirror reported.
Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners are needed for debt sustainability and closing the financing gap, the IMF said. It further noted that it is important for Sri Lanka’s official creditors to provide financial guarantees to restore debt sustainability and work towards a cooperative agreement with private creditors before the IMF provides financial assistance to the island nation. Notably, Sri Lanka’s major creditors include Japan, China and India.
Here’s a recap of how the crisis unfolded in the island nation.
The island nation’s economic crisis is caused by “years of mismanagement, corruption, short-sighted decision-making and an overall lack of good governance,” according to local Sri Lankan media, the Daily Mirror.
Sri Lanka’s central bank has insufficient foreign exchange reserves to access international capital markets, causing the country to default on its debt for the first time in its history. Additionally, uncontrolled external borrowing, tax cuts that increased the budget deficit, restrictions on fertilizer imports, and a sudden float in the Sri Lankan rupee were some of the factors that contributed to the economic collapse.
As the island nation’s economy depends on its tourism industry, the COVID-19 pandemic has exacerbated the economic crisis. Notably, the economic crisis in Sri Lanka sparked mass protests that forced then-president Gotabaya Rajapaksa to flee the country. He moved out of the country after protesters stormed his official residence as the island nation witnessed severe shortages of food, fuel and other essentials.
The people of Sri Lanka are demanding the resignation of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa as they accuse the government of mismanaging the country’s economy.
In early March, thousands of Sri Lankans facing power outages and shortages of essential supplies staged a protest near the private residence of Sri Lankan President Gotabaya Rajapaksa in Mirihana. The protesters made demands that the president should “go home” and called for a resolution to the crisis the nation was witnessing.
People were seen holding placards that read “Gota Go Home” and chanting slogans against the government. Security has been stepped up to keep protesters from entering the presidential residence. People protested rising living costs, gas and fuel shortages and prolonged power outages.
On April 3, except for Prime Minister Mahinda Rajapaksa, 26 ministers in the entire cabinet resigned from their posts due to the economic crisis. On April 5, President Gotabaya Rajapaksa appointed four ministers to maintain stability in parliament.
More people joined the round-the-clock protest at Colombo’s Galle Face Green on April 17 demanding the resignation of the president and government.
On April 12, the Sri Lankan Ministry of Finance announced that the government has suspended repayment of external public debt until discussions between the government and the International Monetary Fund (IMF) are completed and a comprehensive debt restructuring plan is ready.
The announcement by Sri Lanka’s finance ministry came after the government called on the International Monetary Fund to help design an economic recovery plan and provide emergency financial assistance. It also seeks financial assistance from other bilateral and multilateral parties to reduce the suffering faced by the people of Sri Lanka.
On April 18, Sri Lankan President Gotabaya Rajapaksa appointed 17 cabinet ministers to be in charge of the administration of the government. The cabinet includes Foreign Minister GL Peiris and Finance Minister Ali Sabry, with Kanchana Wijesekara as Minister of Power and Energy.
Clashes between government supporters and anti-government protesters broke out in Colombo and other parts of Sri Lanka on May 9, Human Rights Watch said. It said hundreds of people claiming to be supporters of Prime Minister Mahinda Rajapaksa arrived in Colombo on May 9 by bus and traveled to Galle Face Green to demand the government step down Protesters have camped there for weeks.
On May 9, Sri Lankan Prime Minister Mahinda Rajapaksa resigned after protesters kept calling for his resignation. The Sri Lankan government announced a nationwide curfew to prevent clashes between protest groups in Colombo and other parts of Sri Lanka.
On May 13, Ranil Wickremesinghe was sworn in as the 26th Prime Minister of Sri Lanka in the presence of President Gotabaya Rajapaksa. On June 9, the United Nations appealed for $47.2 million in aid to provide life-saving aid as the island nation grapples with an economic crisis, growing food insecurity, protection concerns and shortages of essential goods.
On June 20, Sri Lankan Minister of Electricity and Energy Kanchana Wiesekela called on the public to limit non-essential travel and refrain from refueling in the days before June 23. Viesequela further said he expected a tanker truck to arrive on June 23 and the diesel tanker on June 24.
Protesters break into Sri Lankan President Gotabaya Rajapaksa’s residence in Colombo, July 9, 2018. Kitchen and bedroom rest.
Sri Lankan President Gotabaya Rajapaksa, accompanied by his wife and security officials, fled the country on July 13 for the Maldives. He then traveled to Singapore on July 14 amid protests in Sri Lanka.
On July 15, Mahinda Yapa Abeywardena, Speaker of the Sri Lankan Parliament, announced that she had received the resignation from President Gotabaya Rajapaksa. Sri Lankan Prime Minister Ranil Wickremesinghe was sworn in as the country’s acting president after Gotabaya Rajapaksa tendered his resignation.
Acting President Ranil Wickremesinghe declared a state of emergency in Sri Lanka on July 18. He became Sri Lanka’s president after winning a parliamentary vote on July 20.
At the end of 2021, Sri Lanka’s total debt stood at US$36 billion. According to the “Daily Mirror” report, Sri Lanka must pay 7.1 billion US dollars to China. Total public debt stood at 115.3% of GDP at the end of December 2021 and reached 143.7% of GDP by the end of June 2022.
Notably, officials from the IMF and Sri Lankan authorities reached a staff-level agreement on Sept. 1 to support the island nation’s economic policies.
According to the “Daily Mirror” report, on September 14, Sri Lanka’s Plantation Minister Ramesh Patirana said that the government has approached the country’s major creditors, including Japan, China and India. Pathirana further said that the government is planning to start negotiations with other creditors in the short term.
Meanwhile, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said in a statement at the end of the seventh “1+6” roundtable held in China on December 9 that , “We had a very fruitful exchange on the G20 Common Framework and some concrete examples.”
“We need to build on the momentum of the Chad debt settlement agreement to expedite and complete the Zambia and Sri Lanka debt settlements, which will allow the IMF and multilateral development banks to make payments,” she added.
Kristalina Georgieva, Chinese Premier Li Keqiang, World Bank Group President David Malpass, World Trade Organization Director-General Ngozi Okonjo-Iweala, International Labor Organization Director General Gilbert F. Hornbo attended the meeting.
The meeting was also attended by OECD Secretary-General Matthias Colemann and Financial Stability Board Chairman Claes Knoether. According to news reports, if Sri Lanka is unable to secure an IMF loan in December, the island nation will have to face major hurdles in its economy and policies. (Arnie)
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)
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