Anxious Sri Lanka seeks IMF facility again to tackle BOP crisis
According to Finance Ministry data, the trade deficit has widened by 15.6 per cent to around $4 billion while exports eased 4.2 per cent, year-on-year, to $944 million in June. Export revenue also fell by 0.6 per cent. State foreign borrowings totalled $3.8 billion while local borrowings through Treasury bonds and bills rose to Rs. 661 billion compared to a total of Rs. 445 billion for the whole of 2014, the data showed. As a short term remedy for the present financial crisis, action should be taken to devalue the rupee which will boost exports and conserve foreign exchange reserves, Treasury sources said. The new government will also have to impose austerity measures, increasing taxes, reducing welfare programmes and cutting subsidies to state owned enterprises, they said.
Sri Lanka is going with the ‘begging bowl’ (a frequently used term to denote IMF borrowing when Ronnie de Mel was finance minister in the 1980s), to the International Monetary Fund (IMF) for help to avert a possible economic downturn and the looming balance of payment (BOP) crisis.
A senior government official, who wished to remain anonymous, said that there was a proposal to borrow US$4 billion from the IMF at reasonable rates for balance of payments support. This is despite the IMF refusing a March 2015 request similarly for $4 billion by former Finance Minister Ravi Karunanayake as balance of payment support. The BOP during the first half of this year was a negative $791.7 million compared to a $1,954 million surplus in the corresponding period last year, though however much of this came from foreign borrowings to boost reserves.
Gross official reserves fell to $6.9 billion by end July from $7.5 billion a month earlier. According to Finance Ministry data, the trade deficit has widened by 15.6 per cent to around $4 billion while exports eased 4.2 per cent, year-on-year, to $944 million in June. Export revenue also fell by 0.6 per cent. State foreign borrowings totalled $3.8 billion while local borrowings through Treasury bonds and bills rose to Rs. 661 billion compared to a total of Rs. 445 billion for the whole of 2014, the data showed.
As a short term remedy for the present financial crisis, action should be taken to devalue the rupee which will boost exports and conserve foreign exchange reserves, Treasury sources said. The new government will also have to impose austerity measures, increasing taxes, reducing welfare programmes and cutting subsidies to state owned enterprises, they said.