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The World Bank has agreed to provide Sri Lanka with $600 million in financial assistance to help meet payment requirements for essential imports, the Sri Lankan president’s media division said in a statement on Tuesday.
“The World Bank has agreed to provide $600 million in financial assistance to address the current economic crisis,” the statement said.
The World Bank would release $400 million “shortly”, it said.
According to the statement, the World Bank said it would continue to help Sri Lanka to overcome the current economic crisis.
Sri Lanka‘s economy was hit hard by the pandemic and tax cuts by the populist government, leading to dwindling foreign currency reserves and shortages of fuel, food, and medicines.
The worst economic crisis since the country’s independence has dashed hopes that it could once more become the booming tourist destination it was before COVID-19 halted global travel in 2020.
Power cuts and essential food shortages have hit the island nation hard for weeks, drawing protesters onto the streets and putting President Gotabaya Rajapaksa under mounting pressure to resign. Last week one person died in a protest, the first fatality since the demonstrations began last month.
Earlier this month, Sri Lanka kicked off talks with the International Monetary Fund (IMF) for financial assistance. Before the IMF finalizes a program for Sri Lanka, the country needs $3-$4 billion in bridge financing to help meet its essential expenses.
The Sri Lankan government has also appealed to multiple countries and multilateral organizations for bridge financing until the IMF comes up with its aid.
Sri Lankan Finance Minister Ali Sabry was in Washington last week to talk to the IMF, the World Bank, India, and others about financing help for the island nation, which has suspended payments on portions of its $51 billion in external debt.
India has helped Sri Lanka by assisting with $1.9 billion, and Colombo is in talks with New Delhi for an extra $1.5 billion to fund imports, including fuel.
The country has also begun discussions with China about refinancing its debt, a cabinet spokesman said on Tuesday. China’s $3.5 billion of loans to Sri Lanka make it the joint-largest bilateral creditor.
Sri Lanka’s Finance Minister Ali Sabry said Colombo would also seek assistance from the Asian Development Bank.
The country announced a suspension on some of its foreign debt repayments earlier this month and said it would divert its meager reserves to fund essential imports such as fuel, cooking gas, and medicine.
Copyright 2022 Thomson/Reuters