Sri Lanka extends begging bowl to Singapore for bridge financing
Sri Lanka needs to get bridge financing from friendly donor countries before restructuring its foreign debt and entering into a framework programme with the IMF, to last for next six months, finance ministry sources said.
Known external debt repayments over the next five years amount to US$ 26 billion, or about US$ 5 billion a year, which is over 80 percent of government revenue in 2020.
India and the World Bank are looking at extending nearly US$ 2 billion in bridge finance to help it continue with essential imports.
However The World Bank has ruled out bridge financing or new loan commitments to crisis hit Sri Lanka until the island nation’s economy sets up an adequate macroeconomic policy framework, the global lender has said
The country of 22 million people is struggling to pay for imports after a sharp drop in foreign exchange reserves, which has led to currency devaluation and rising inflation.
Sri Lanka, which has an external debt of US$51 billion, with protests across the country over prolonged power cuts and a lack of fuel and medicines, has sought to secure funds to help it through its worst economic crisis. is working on a comprehensive plan for foreign aid.
Under this setup Sri Lanka has sought bridge financing from Singapore as well as an increase in foreign direct investments.
At the invitation of the Minister for Foreign Affairs of Singapore, Dr Vivian Balakrishnan, Minister Foreign Affairs Prof. G. L. Peiris undertook an official visit to Singapore from 8-9 June, 2022.
An official visit of a Foreign Minister of Sri Lanka to Singapore is taking place after four years.
During the visit, a bilateral meeting was held with the Minister for Foreign Affairs of Singapore, following which Minister Peiris was hosted to an official lunch.
Minister Peiris also met with Singapore’s Minister of Finance Lawrence Wong, who is due to assume the post of Deputy Prime Minister of Singapore on 13 June, 2022.
Minister for Law and Home Affairs K Shanmugam hosted the Sri Lankan Foreign Minister for lunch on 8 June with the participation of the Minister for Trade and Industry of Singapore S. Iswaran with many other dignitaries.
Sri Lanka’s foreign exchange reserves are at dangerously low levels (US$ 1.92 billion or less than one month of imports), especially given the US$ 6.9 billion in debt service payments coming due in 2022.
The government has asked some creditors to restructure their debt and has also sought help from China, Japan and the Asian Development Bank.
India has already agreed to double the existing US$ 500 million line of credit for fuel and defer about US$ 1.5 billion in import payments that Sri Lanka is required to make to the Asian Clearing Association.
The Indian High Commission said it has also extended the tenure of the $ 400 million swap awarded in January.