Sri Lanka must urgently seek funds from multilateral lenders and aim to restructure a debt payment due in July, its outgoing finance minister said on Thursday, pleading for political stability amid the country’s worst economic crisis since decades. The opposition and some ruling coalition partners this week rejected calls for a unity government made by President Gotabaya Rajapaksa after his cabinet dissolved, hoping to quell street protests that had been going on for decades. weeks against shortages of fuel, electricity, food and medicine.
With its rapidly shrinking foreign exchange reserves, massive debt repayments and falling rupee, analysts say the government – controlled by Rajapaksa and his older brother Mahinda, the prime minister – is running out of options .
Reserves fell 16% to $1.93 billion in March, central bank data showed on Thursday.
“We need to consider how to structure the payment of a billion dollar international sovereign bond maturing in July,” said Ali Sabry, who tendered his resignation to Rajapaksa on Tuesday. “You have to go to the IMF, there is no other solution that I see.” Sabry was transferred to Justice Ministry Finance on Monday to replace President Rajapaksa’s younger brother, Basil Rajapaksa. It was not immediately clear whether Rajapaksa had accepted Sabry’s resignation, submitted days before scheduled talks with the IMF for emergency loans.
As the island nation tries to fast-track proposals for submission to the IMF, President Rajapaksa on Thursday appointed KMM Siriwardana, a deputy central bank governor who previously worked with the Fund, as treasury secretary.
The $1 billion bond maturing on July 25 was trading at 54 cents to the dollar, its lowest level since the spring of 2020, when the COVID-19 rout hit global financial markets, the data shows. from MarketAxess.
Other Sri Lankan dollar-denominated sovereign bonds traded at even more stressed levels, with most changing hands around 40 cents on the dollar.
“We need to have political stability to find solutions to the financial crisis,” Sabry said. “We need to discuss with the World Bank and we need to have a bridging financing plan with the AfDB. If we don’t have stability, who will lead these talks? he said, referring to the Philippines-based Asian Development Bank.
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