Sri Lanka Likely to Request $4 Billion Bailout from IMF

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Sri Lanka, which has declared default, is expected to request a $4 billion (approximately 4.896 trillion KRW) bailout program from the International Monetary Fund (IMF).

On the 13th (local time), Bloomberg reported that Finance Minister Ali Sabry stated this in an interview with Bloomberg Television. He is expected to propose this plan during discussions with the IMF scheduled to take place in Washington on the 18th.

Minister Sabry also said, "If the talks proceed smoothly, we expect emergency bailout funds to be provided within a week." He explained, "What we want to appeal to the IMF is that we want to resolve this situation as soon as possible."

Minister Sabry is a key member of the team negotiating the IMF bailout along with Nandalal Weerasinghe, the newly appointed Governor of the Central Bank of Sri Lanka.

He also explained the country's situation regarding loan repayments to investors. Minister Sabry emphasized, "We will definitely repay the debt," adding, "We have the commitment and aspiration, but currently lack the financial capacity to spend immediately."

Donato Guarino and Johanna Chua, analysts at Citigroup Global Markets, stated in an investment note sent to clients that IMF intervention would help negotiations with bondholders. They predicted that Sri Lanka would request a 50% reduction on interest payments and a 20% cut on principal from investors.

Meanwhile, Sri Lanka announced on the 12th that it would temporarily suspend repayment of overseas debt amounting to $51 billion until IMF bailout funds are provided. The Central Bank Governor said, "To avoid a hard default (a de facto default where private bondholders suffer total losses), we are temporarily deferring external debt payments," adding, "Limited foreign currency reserves will be used to import essential items such as fuel."