Sri Lanka is on the brink of collapse as the government plans to seek a $4 billion bail-out from IMF. The country’s ailing economy suffered from a severe forex crisis. This has led to 12-hour power cuts, and a shortage of food, medicine, and other essential supplies.
Sri Lanka’s finance ministry announced the suspension of foreign debt payments as it plans to secure a loan from IMF to meet the $7 billion debt payments this year. This is the first time the country has defaulted on its payment since its independence in 1948.
The current crisis triggered protests across the nation to oust President Gotabaya Rajapaksa. As a result, Sri Lanka’s entire cabinet aside from the President and his brother, the Prime Minister resigned. Earlier this month, he fired his brother and Minister of Finance, Basil Rajapaksa. He invited the opposition to vote on a replacement but was declined. He largely said that the reason for the ailing economy was the pandemic.
While the country enters a negotiation with the IMF for a bail-out fund, Sri Lanka is seeking help from India. India Finance Minister Nirmala Sitharaman held several meetings with Sri Lankan government. Aside from the request for aid, Sri Lanka also asked India to reach out to friendly countries to extend a line of credit.
Currently, India has already provided a line of credit amounting to 2.4 billion dollars to the ailing nation. This came in the form of food, fuel, medicine, currency swap, and deferment of payment at the Asian Clearing Union.
Sri Lanka’s fall began at the onset of the pandemic when its tourism sector could not produce any income. It has then continuously spiraled out of control and resulted in a massive economic crisis.