New Delhi: Sri Lanka is grappling with a severe economic crisis, with several analysts saying the country may eventually have to turn to the International Monetary Fund (IMF) for a bailout. But the government is hesitant on this front.
The Sri Lankan government sees this only as “one of many options”, and central bank governor Ajit Nivard Cabral said the IMF is not a “magic wand”.
According to a Reuters report on Wednesday, he said, “Going to the IMF should not be taken lightly. The Monetary Board has had several discussions on the matter and we only see the IMF as one of the many options.” “
“We believe the path we are on is the most appropriate one. The IMF is not a solution, it is not a magic wand,” he said while addressing an event organized by Sri Lanka’s Department of Government Information.
Sri Lanka is under a huge debt burden, and will have to pay $4.5 billion for loan repayment in 2022, starting with a $500 million International Sovereign Bond (ISB) maturing on January 18.
However, Cabral told Sri Lanka Will meet all loan repayments this year. He also said that he would work on a comprehensive plan to rebuild the depleting foreign exchange reserves.
Also read: Sri Lanka’s unprecedented economic crisis – what we know so far Explained
Sri Lanka may ask for another loan from China
One of the main reasons for Sri Lanka’s economic crisis is its heavy foreign debt.
The forex reserves available with the country declined to just $1.58 billion in November from $7.5 billion in 2019.
Fueling bankruptcy fears, opposition lawmaker and economist Harsh de Silva told parliament in early December that the country’s foreign exchange reserves would be minus $437m by January. “The country will go completely bankrupt,” he was quoted as saying in the Sri Lankan newspaper Daily Mirror.
The MP had said that seeking assistance from the International Monetary Fund (IMF) was the “only way” to deal with the crisis.
Similar suggestions came from other quarters, including international economists. However, the country has so far refrained from going this way.
In December it was reported that the Sri Lankan cabinet was undecided on the demand for an IMF loan.
Meanwhile, Sri Lanka managed to increase its foreign exchange reserves to $3.1 billion at the end of December following a $1.5 billion yuan currency exchange with China.
Denying an IMF loan, Cabral said on Wednesday that they may consider a new loan from China.
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