Sri Lanka may miss the December deadline to get the IMF loan because China, the main lender, was very busy in the past and the next meeting of the IMF board is in March 2023.
Image Credit source: AP
severe economic crisis facing the situation Sri Lanka The troubled situation is not taking its name to end and again this country is heading towards great political upheaval. Sri Lanka has been in the debt trap for a long time but now it seems that it will not be able to get it till December. China There is no possibility of getting the loan from the side as well because the party was busy in its own Congress.
According to Washington-based financial analysts, Sri Lanka will likely miss the International Monetary Fund’s (IMF) deadline of December and will have until March next year to get a loan of USD 2.9 billion from the lending institution in eight equal tranches. Will have to wait. Meanwhile, Sri Lanka’s debt has increased further due to a fall in foreign exchange, deep recession and rising fiscal deficit. Since the end of 2021, inflation has pushed down the real value of home loans significantly.
China can’t even start talking
While debtors India and Japan have already started talks with Colombo on debt resolution and restructuring, China is yet to join the talks as Beijing was involved in organizing the 20th National Congress party till recently. And he did not have much time for Sri Lanka, a country willing to take a loan.
Last year at the end of 2021, the total debt of this country was 36 billion US dollars. Of this, Sri Lanka owes China US $ 7.1 billion or 20 percent of its total debt. Its total public debt, which was 115.3 percent of GDP at the end of December 2021, has now increased to 143.7 percent of GDP by the end of June 2022. Out of this, bilateral debt has increased from 12.7 per cent of GDP to 20.4 per cent.
Hope not to get loan till December
On 31 October last month, Sri Lankan President Ranil Wickremesinghe said, “Everything is in process now, and we have to move forward continuously. We can reach an agreement by December, which means a deal by mid-November, and go to the IMF board in mid-December, so we can have a big advantage. However, I don’t know if we can do it in such a simple way that after the Congress Party convention in China, the focus has now started on this issue. However, we should aim to achieve it by January.” It has to be admitted that Sri Lanka will have to wait now to get the loan.
Wickremesinghe, the lone MP of his party and a close ally of the unpopular Rajapaksa regime, is the big reason behind this political turmoil is the US$850 million bridge gap funding to Sri Lanka to stay until the next IMF board meeting in March. will be needed. Or as in July-August last, there will be public protests in the country and political demonstrations of ultra-left parties will start because the Sri Lankan opposition does not have the capacity to stand on its own.
Now the big question is, who will provide the $850 million bridge funding to help Colombo sustain itself by March 2023?
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