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Sri Lanka’s economic condition has sunk a level further. It came to light when Finance Minister Ali Sabry told the parliament that the country’s foreign exchange reserves had fallen below $50 million on Wednesday. The plight raises concern over how the Sri Lankan government would manage to buy food, fuel, and other essential commodities for its citizens.   

“IMF is not Aladdin’s magic lamp”

The minister added, “In 2021, total income was 1500 billion (Sri Lankan) Rupees…expenditure was 3522 billion rupees…we were living (beyond) our means.” Underscoring how deep-rooted Sri Lanka’s economic woes are, he cautioned that aid from the World Bank or the IMF would not suffice. “The IMF is not Aladdin’s magic lamp,” said the minister. 

Sri Lanka’s foreign exchange reserves stood at $2.31 billion in February. However, in March, it fell to $1.93 billion. Presently, it is $50 million. According to Reuters, forex reserves have tanked 70 percent in two years.

The country was expecting some $3-4 billion from the World Bank in bridge financing to meet essential expenditures. Instead, it would receive only $400 million from the World Bank. 

Hails India’s support

Hailing India’s support, Sabry mentioned that he met Nirmala Sitharaman during his talks with the IMF. Last month the Indian FM told Sri Lanka that India would extend all possible cooperation to help the nation emerge from the crisis. Accordingly, she also recommended Sri Lanka’s case to the global financial body’s chief, Kristalina Georgieva, and suggested that the country could be temporarily categorized under low-income groups to help restructure its debt.  

Since January, India has extended over $3 billion in assistance to Sri Lanka in loans, credit lines, and currency swaps. Further, in addition to two $500 million fuel support, it offered another $200 million on Monday. Sri Lanka has also appealed to defer its $2.5 billion payments to the Asian Clearing Union. 

The current economic meltdown is a result of its dwindling forex reserves. It has led to a massive shortage in food, fuel, medicines, and other essential commodities the nation has been importing. As a result, furious Sri Lankans have been protesting on the streets, urging the ruling Gotabaya family to step down. Currently, the main opposition party has tabled a no-confidence motion against Rajapaksa.    

Reference: Reuters, HT