Exclusive Sri Lanka seeks $ 3 billion to avert crisis

  • Seeks another $ 500 million from India for fuel
  • Ensuring the supply of essential commodities is the top priority of the government
  • Raise taxes and fuel prices within six months

Colombo, April 9 (Reuters) – Sri Lanka will need about $ 3 billion in foreign aid over the next six months to restore supplies of essential commodities, including fuel and medicine, its finance minister told Reuters on Saturday.

The island nation of 22 million people is suffering from prolonged power outages and shortages, which have dragged protesters into the streets and put more pressure on President Gotabhaya Rajapakse.

“This is a difficult task,” Finance Minister Ali Sabri said in his first interview since taking office this week, noting that the country will find $ 3 billion in bridge funding as it prepares for talks with the International Monetary Fund (IMF) this month.

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The country is seeking to restructure international sovereign bonds and seek a moratorium on payments, and hopes to negotiate more than $ 1 billion in bonds in July.

“The whole effort should not go into a difficult default,” Sabri said. “We understand the consequences of a difficult default.”

JPMorgan analysts estimate Sri Lanka’s total debt services this week at $ 7 billion, while the current account deficit is about $ 3 billion.

The country has $ 12.55 billion in outstanding international sovereign bonds, according to central bank data, with $ 1.93 billion in foreign reserves at the end of March.

“The first priority is to see us return to the normal path of supply in terms of fuel, gas, medicines … and thereby electricity, so that the uprising can be resolved,” Sabri said.

‘Hope’

Anti-government protests have been raging across the island for days, with at least one turning violent in Colombo, threatening the country’s lucrative tourism sector.

“We respect your right to protest, but not violence because it causes repercussions,” Sabri said.

“Our tourism, which was returning beautifully with 140,000 tourists in February, has been severely affected by the protests.”

Thousands of protesters gathered near the president’s maritime office in Colombo on Sunday, one of the largest public outcries of recent days.

Many protesters have stopped a large-scale police near the country’s national flag and at least a water cannon.

Dozens of Muslims sat in the middle of a forbidden street to break Ramadan fasting, while others shouted “Go home to Kota (Kottapaya)” and urge the president to step down.

Sabri said he would take a delegation of Sri Lankan officials to Washington to begin talks with the International Monetary Fund on April 18 and that financial and legal advisers would be selected within 21 days to help the government restructure its international debt.

“Once we get to them, the first thing is to have confidence that we are active in the entire international monetary community,” he said. “We are transparent and we are ready to get involved.”

On Friday, a new central bank governor raised interest rates by an unprecedented 700 basis points in an effort to control inflation and stabilize the economy. read more

Sabri said Sri Lankan authorities would also approach appraisals as the country seeks to regain access to international financial markets after being locked down from 2020 due to multiple downgrades.

Sabri said the government would raise taxes and fuel prices within six months and try to reform the loss-making state-owned enterprises.

These measures were one of the key recommendations in the IMF review of the Sri Lankan economy released in early March.

“These are very unpopular activities, but these are the things we need to do to get the country out of it,” Sabri said. “Will you do that or go down the drain permanently?”

‘Friend to all’

Sri Lanka will seek another $ 500 million in debt from India for fuel, which will be enough for about five weeks, Sabri said.

The government will also seek the support of bilateral partners, including the Asian Development Bank, the World Bank and China, the United States, the United Kingdom and the Middle East.

“We know where we are, only to fight back,” Sabri said casually in a blue T-shirt and jeans. “We have no choice.”

Discussions are underway with the Sri Lankan president in January on a $ 1.5 billion loan with China, a joint loan of up to $ 1 billion and the restructuring of some of the debt.

“We hope we can get some relief until the big infusions come,” Sabri said.

Beijing and New Delhi have long sought to influence an island beyond the southern tip of India, and the country is moving closer to China under the powerful Rajapaksa family.

But in recent weeks, as the economic crisis deepens, Sri Lanka has relied heavily on Indian aid.

Lawyer Sabri, who previously served as Sri Lanka’s Minister of Justice, said, “We are a neutral country. We are all friends. So we think goodwill will come at this time.”

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Report by Devajyot Koshal and Udita Jayasinghe in Colombo; Editing by William Mallard and Jason Neely

Our Standards: Thomson Reuters Trust Principles.

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