Sri Lanka will miss the December deadline for securing an IMF loan as main bilateral debtor China was involved in the 20th Party Congress and had little time to hold debt restructuring talks with Colombo. The next meeting of the IMF Executive Board is in March 2023.
Sri Lanka is headed for major political turmoil as it will not be able to secure a much-needed IMF loan to its main ally in December and indebted China attended the 20th Party Congress and is yet to start talks on debt restructuring. . Island nation.
According to Washington-based financial analysts, Sri Lanka will likely miss the December IMF deadline and will have to wait till March 2023 to secure a USD 2.9 billion loan from the lending institution in eight equal tranches. Meanwhile, Sri Lankan debt has increased further due to foreign currency depreciation, deep recession and rising fiscal deficit. Since the end of 2021, inflation has significantly reduced the real value of home loans.
While debtors India and Japan have already started talks with Colombo on debt resolution and restructuring, China is yet to engage in talks as Beijing was involved in the 20th National Party Congress and there is little time for client state Sri Lanka. was. The island nation's total debt stood at US$36 billion at the end of 2021. Of this, Sri Lanka owes China $7.1 billion or 20 percent of its debt. The total public debt, which stood at 115.3 per cent of GDP at the end of December 2021, now stands at 143.7 per cent of GDP at the end of June 2022. Out of this, bilateral debt has increased from 12.7 per cent of GDP to 12.7 per cent. 20.4 percent of GDP. On October 31, 2022, Sri Lankan President Ranil Wickremesinghe said: "Now, that's the process, we had to move on. If we can reach an agreement by December, which means making an agreement by mid-November, and December going to the IMF board in the middle of the year, we will have a big advantage. However, I do not know if we can do it for the simple reason that the focus has now started to come after the party conference in China. However, we One should aim to achieve this by January.”
The political juggernaut behind Wickremesinghe, the lone MP of his party and a close ally of the disgraced Rajapaksa regime, is the fact that Sri Lanka will need USD 850 million bridge gap funding to survive until the next IMF board meeting. march. Or as in July-August last, there will be public protests and the ultra-left parties will gain political traction as the Sri Lankan opposition does not have the clout to stand on its own. The question is, who will provide the USD 850 million bridge funding to help Colombo survive till March 2023?
The economic crisis in Sri Lanka is due to misrule, poor fiscal discipline and corruption by the Rajapaksa regime, which acquired the 900-megawatt Norochcholia power station with Chinese help after taking a loan from Beijing at an 11 percent interest rate. White elephant projects launched by Sri Lanka with Chinese aid have plunged the island nation into an economic black hole with no signs of improvement for at least the next five years.
