Crisis-hit Sri Lanka needs $5bn help from China for essentials-PM

The PM said the country was renegotiating the terms of a yuan-denominated swap worth 1.5 billion dollars with China so as to fund essential imports.

 

Sri Lanka Prime Minister on Tuesday said the country needed  five billion dollars over the next six months to ensure basic living standards.

The PM said the country was renegotiating the terms of a yuan-denominated swap worth 1.5 billion dollars with China so as to fund essential imports.

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.

Prime Minister Ranil Wickremesinghe told parliament that to tide over the turmoil, Sri Lanka would need about 3.3 billion dollars for fuel imports, 900 million dollars for food, 250 million dollars for cooking gas and 600 million dollars more for fertiliser this year.

Wickremesinghe said the central bank had estimated the economy would  contract by 3.5 per cent in 2022, but added that he was confident growth could return with a strong reform package, debt restructuring and international support.

Wickremesinghe, who was working on an interim budget to balance battered public finances said “only establishing economic stability is not enough, we have to restructure the entire economy. We need to achieve economic stability by the end of 2023.’’

The Indian Ocean nation of 22 million was negotiating a loan package worth about 3 billion dollars from the International Monetary Fund, in addition to help from countries such as China, India and Japan.

On Tuesday, the cabinet approved a 55 million dollars credit line from India’s Exim Bank to fund 150,000 tonnes of urea imports a critical requirement as supplies have run out during the current cropping season.

Cabinet spokesman Bandula Gunawardena told reporters that “farmers do not need to be worried about not having inputs for the next season,’’ estimating that 150,000 tons of urea would be needed for the next cultivation cycle.

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While food inflation of 57 per cent was partly driven by higher global commodity prices, a depreciated currency and low domestic production, it was estimated that yielded from the next harvest would  be halved by the lack of fertiliser.

According to the PM, the United Nations was set to make a worldwide public appeal for Sri Lanka on Wednesday, and has pledged 48 million dollars for food, agriculture and health.

Sri Lanka was also renegotiating with China the terms of a yuan denominated swap worth 1.5 billion dollars agreed in 2021.

The initial terms provided that the swap could only be used if Sri Lanka maintained reserves equivalent to three months of imports.

However, with reserves now well below that level, Sri Lanka had to request China to reconsider the requirement and allow the swap to precede, Wickremesinghe said.

Wickremesinghe, who was also finance minister, would unveil an interim budget in July that he said aimed  to slash government expenses and looks to increase annual welfare spending to 500 million dollars from about 350 million dollars.

 

(Reuters/NAN)

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