Sri Lanka

Sri Lanka will need $5 billion over the next six months to ensure basic living standards, and is renegotiating the terms of a yuan-denominated swap worth $1.5 billion with China so as to fund essential imports, the prime minister said on Tuesday, Reuters reported. The island nation's worst economic crisis in seven decades led to a shortage of foreign exchange that stalled imports of essential items such as fuel, medicine and fertiliser, provoking devaluation, street protests and a change of government.

Sri Lanka seeks to secure around $5 billion in funding this year to cover repayments for fuel imports and other items bought through credit lines, and another $1 billion to bolster its foreign reserves, the prime minister's office said on Thursday, Reuters reported. The island nation is grappling with its worst financial crisis in over seven decades with a severe foreign exchange shortage that has left it struggling to pay for essential imports including food, fuel, fertilisers and medicines. Sri Lanka's foreign exchange reserves stood at $1.81 billion in April.

Sri Lanka’s headline inflation surged to a record in May amid continuing food and fuel shortages as the country struggles to lift itself out of its worst economic crisis, Bloomberg News reported. Consumer prices in the capital Colombo rose 39.1% from a year ago, the Department of Census and Statistics said in a statement Tuesday. That’s faster than the median 35% climb forecast by economists in a Bloomberg survey and is the highest level on record. Food inflation surged 57.4%, while prices of non-food items jumped 30.6%, the data showed.

Sri Lanka’s prime minister said on Thursday that he will quickly prepare an economic reform program and seek approval from the International Monetary Fund — because global inflation and the financial impact of Russia’s invasion of Ukraine on other countries could limit their ability to help the island nation, the Associated Press reported. Prime Minister Ranil Wickremesinghe said that officials have reached agreement on basic reforms concepts with the IMF and that he plans to have the economic reform program ready within two weeks.

The International Monetary Fund (IMF) said that it made “good progress” in analysing Sri Lanka’s economic situation and identifying policy priorities, while cautioning that a loan would require adequate assurances that debt sustainability will be restored, Bloomberg News reported.

Sri Lanka’s newly appointed Prime Minister Ranil Wickremesinghe will double up as finance minister leading bailout talks with the International Monetary Fund, Bloomberg News reported. Wickremesinghe, who was appointed this month following violent unrest, was sworn in by President Gotabaya Rajapaksa as Minister of Finance and Economic Stabilization and National Policies, according to a statement from the presidential media unit.

The Group of Seven economic powers support debt relief efforts for Sri Lanka, G7 finance chiefs said on Thursday in a draft communique from a meeting in Germany after the country defaulted on its sovereign debt, Reuters reported. "The G7 stands ready to support the Paris Club’s efforts, in line with its principles, to address the need for a debt treatment for Sri Lanka," the draft statement to be finalised before the end the meeting on Friday said.

Sri Lanka’s impending default on $12.6 billion of overseas bonds is flashing a warning sign to investors in other developing nations that surging inflation is set to take a painful toll, Bloomberg News reported. The South Asian nation is set to blow through the grace period on $78 million of payments Wednesday, marking its first sovereign debt default since it gained independence from Britain in 1948. Its bonds already trade deep in distressed territory, with holders bracing for losses approaching 60 cents on the dollar. The government said last month it would halt payments on foreign debt.

Sri Lanka’s new government plans to sell its national airline to stem losses, part of efforts to stabilize the nation’s finances even as authorities are forced to print money to pay government salaries, Bloomberg News reported. The new administration plans to privatize Sri Lankan Airlines, Prime Minister Ranil Wickremesinghe said in a televised address to the nation Monday. The carrier lost 45 billion rupees ($124 million) in the year ending March 2021, he said just days before the nation is set to formally default on foreign debt.

Ranil Wickremesinghe, a veteran lawmaker and former premier, has been named Sri Lanka’s next prime minister days after the last incumbent, the brother of President Gotabaya Rajapaksa, resigned in the face of escalating anger with the deepening economic crisis, Bloomberg News reported. The president’s media unit confirmed the appointment Thursday in a text message. No other details were immediately available. The announcement may bring a modicum of stability to the country, which is on the verge of bankruptcy and needs a government to lead bailout talks with the International Monetary Fund.