Lanka's usable foreign reserves drop to record low, FM hails India's support at IMF

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Sri Lankans protest demanding president Gotabaya Rajapaksa resign in Colombo, Sri Lanka, Monday, April 4, 2022 | Photo: AP

Colombo: Sri Lanka's Finance Minister Ali Sabry on Wednesday hailed India's assistance during its talks with the IMF to seek a bailout to evade the country's worst economic crisis, as the island nation's usable foreign reserves dropped to less than USD 50 million.

Making a speech in Parliament on the IMF negotiations and the current status of the crisis, Sabri, who returned to Sri Lanka after talks with the IMF, said he met India's Finance Minister Nirmala Sitharaman twice and she extended India's fullest assistance for a rapid financing instrument (RFI) facility for Sri Lanka.

The main Opposition leader, Sajith Premadasa, riled the treasury benches by saying that India had asked him if they should help Sri Lanka before making contact with the government.

“I am not lying I told them they should do whatever possible to assist the Sri Lankan people. It is only after that they assisted the government," he said.

India has committed more than USD 3 billion to debt-ridden Sri Lanka in loans, credit lines and credit swaps since January this year.

On Monday, India extended its current credit line by a further USD 200 million to replenish Sri Lanka's rapidly depleting fuel stocks.

Giving the perilous state of the economy, Sabry said the island nation's usable foreign reserves has dropped below USD 50 million.

He said the country is at a critical juncture to make a decision on “implementing reforms, like South Korea and India in 1990 and 1991 or going down like in the cases of Venezuela or Lebanon”.

“In 2021, the total state income with grants and revenue was just 1500 billion rupees opposed to the expenditure of 3522 billion rupees. We have been over spending two and a half times," he said.

Sabry said an IMF programme would be important to undertake much needed reforms, adding that the government had committed “a historical mistake” in not opting for an IMF programme much earlier.

“We as a country was living behind our means, all governments have spent more than they earned," he said.

Sabry said Sri Lanka needs USD 3-4 billion, bridging finance until the IMF facility could kick in. “The IMF is not Aladdin's magic lamp," he warned.

Sabry, who originally resigned from the finance ministry before being reappointed, said a united effort was needed to pull the country out of the crisis.

He said he is ready to sacrifice his job if someone else could take over from him.

Sri Lanka is on the brink of bankruptcy and has suspended payments on its foreign loans. Its economic miseries have brought on a political crisis, with the government facing a protests and a no-confidence motion in Parliament.

Sabri's comments came a day after the country's main opposition party SJB handed over to the parliamentary Speaker motions of no-confidence against President Gotabaya Rajapaksa and the government for mishandling the country's worst economic crisis.

The Opposition parties accuse top government officials of excessively printing money, hurting farm production by banning chemical fertilizers to make the production fully organic and minimize import costs, failing to order COVID-19 vaccines in a timely manner and buying them later at higher prices.

Thousands of demonstrators have hit the streets across Sri Lanka since April 9, as the government ran out of money for vital imports; prices of essential commodities have skyrocketed and there are acute shortages in fuel, medicines and electricity supply.

Protestors are demanding the resignations of Prime Minister Mahinda Rajapaksa, who heads the powerful family that has held power for most of the past two decades, and his younger brother President Gotabaya Rajapaksa.

So far, the Rajapaksa brothers have resisted calls to resign, though three other Rajapaksas out of the five who are lawmakers stepped down from their Cabinet posts in mid-April.

Sri Lanka's Parliament is to meet on Thursday to elect a Deputy Speaker as President Gotabaya Rajapaksa had accepted the resignation of the incumbent Ranjith Siyambalapitiya, Speaker Mahinda Yapa Abeyawardene announced. PTI

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