Sri Lankan PM takes on dual role to save country from debt

Colombo: Sri Lanka’s new prime minister, Ranil Wickremesinghe, will also serve as finance minister and lead bailout talks with the International Monetary Fund.

Wickremesinghe held talks with foreign envoys, including from India, China and the United States, and discussed with representatives of the Asian Development Bank and the World Bank ways to replenish stocks of food, fertilizers and medicines. Sri Lanka needs $4 billion over the next eight months to pay for essential imports.

The neck deeply in debt

The island nation fell into default for the first time in its history after a 30-day grace period for missed interest payments on two of its sovereign bonds expired. The country’s central bank has also warned that headline inflation will worsen to 40% in the coming months.

The decision to appoint Wickeremesinghe as finance minister comes as opposition parties have refused to take key roles in the so-called unity government, underscoring the risk of further political instability to come.

Policy framework

The World Bank said in a statement on Tuesday that it does not plan to offer new financing to Sri Lanka “until an adequate macroeconomic policy framework is in place”.

In the meantime, the World Bank is reallocating resources from previously approved projects to help the government with some essential medicines, temporary cash transfers for poor and vulnerable households, and to support farmers and small businesses.

As a member of the opposition, Wickeremesinghe had been critical of the president’s policies, pointing to falling foreign exchange reserves and signaling early on that the government should seek IMF assistance.

Besides raising funds and tackling Asia’s highest inflation, he will have to raise taxes to bridge the widening gap between revenue and spending.

The Sri Lankan dollar bond due July was listed up 0.1 cent at 42.89 cents on the dollar, set for the third day of gains.

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