With Debt Crunch Looming, Sri Lanka Needs Help From Its Friends

Sri Lanka’s finances were fragile long before the coronavirus delivered its blow, but unless the country can secure aid from allies like China, economists say it may have to make a fresh appeal to the IMF or default on its debt, Reuters reported. All the tell-tale crisis signs are there: a tumbling currency, credit rating downgrades, bonds at half their face value, debt-to-GDP levels above 90% and almost 70% of government revenues being spent on interest payments alone. The IMF seems the obvious option — Sri Lanka has already asked the Fund for a ‘Rapid Credit Facility’ — but securing a new longer-term arrangement might not be straight forward. The new government veered off its soon-to-expire current IMF programme late last year by slashing taxes, including VAT and the ‘nation-building’ tax brought in after the island’s long-running civil war in 2009. Read more