COLOMBO
Sri Lanka’s economic recovery will depend on reforms carried out with support from the IMF, but the government will not ignore the country’s poor, Finance Minister Ali Sabry said.
The newly appointed minister agreed Peppystores before leaving for Washington DC where he will lead the Sri Lankan delegation in negotiations with the International Monetary Fund. “We have seen huge cuts in the country’s revenue and are trying to recover from the current economic crisis. Reforms will be crucial,” he said.
Mr Sabry, who served as Justice Minister in the former Cabinet, resigned alongside his Cabinet colleagues in early April amid mounting pressure from citizens demanding that the President, Prime Minister and their relatives step down in office over “mismanagement” of the crisis. President Gotabaya Rajapaksa soon appointed him finance minister in a “new” four-member cabinet. Mr Sabry reportedly resigned again, but this was not accepted by the President.
After Sri Lanka decided not to pay its foreign debt totaling around $50 billion, Colombo relies on an IMF program to improve borrowing opportunities on the international market. Sri Lanka has received IMF assistance at least 16 times in the past.
On what Sri Lanka would submit to the International Financial Institution, which is expected to expand its support due to difficult conditions, Mr Sabry said: “We believe that a poverty alleviation program is necessary. We definitely need a safety net for the poor. We cannot ignore the poor,” he said. According to a recent World Bank report on Sri Lanka, at least 5,000 people fell below the poverty line during the years of the pandemic due to severe job and income losses.
It remains to be seen how the government, which previously refused to seek IMF assistance, might now balance the fund’s likely imperatives of fiscal discipline and prudent government spending with growing public discontent.
That the government is feeling the heat was clear in Prime Minister Mahinda Rajapaksa’s recent address to the nation, in which he urged protesters to “be patient.” Furthermore, in the government’s first public acknowledgment, Mr Mahinda said that the president’s abrupt change in policy towards organic farming had backfired: “No matter how honorable the idea of organic fertilizer is, this is not the time to implement it. Therefore, we will reintroduce fertilizer subsidies,” signaling a complete policy reversal. It would also mean that Sri Lanka would have to set aside about $400 million a year to import chemical fertilizers.
However, Mr Sabry indicated the government was ready to take bold decisions at this point, saying: “We cannot think about partisan politics now when the country is in dire need of attention. We must put the future of our country above all else, even if that means taking political risks.”
“India’s Lifeline”
During his time in Washington DC next week, Mr Sabry will also meet his Indian counterpart, Finance Minister Nirmala Sitharaman, on the sidelines of the fund’s spring meeting and will discuss “further possible aid” from India as Sri Lanka grapples with a severe economic downturn leading to record inflation, heavier food shortages and a massive uprising of angry citizens. India has provided $2.4 billion in aid this year, and Colombo has approached New Delhi for further assistance, including an additional $500 million credit line for fuel imports and help to secure “bridging” financing. to cope with the import bill this year.
“We’re going to need about $4 billion for the rest of the year to manage our reserves. We hope for support from the IMF, the World Bank and bilateral partners such as India and China. India has extended a lifeline to us and I look forward to discussions with Ms. Sitharaman about further possible support from India, our regional leader,” said Mr. Sabry.
China recently said it was “studying” a new request from Sri Lanka for $2.5 billion in assistance, apart from the $2.8 billion in assistance Beijing has provided since the pandemic began . Asked about the status of the application, the minister said negotiations were “ongoing”.
