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Sri Lanka needs 5 billion USD in the next 6 months to maintain basic living conditions

Sri Lankans line up to buy kerosene amid a gas shortage, March 21, 2022. (Photo: Reuters)

Presently Sri Lanka is renegotiating the terms of a $1.5 billion yuan swap with China to finance essential imports, Prime Minister Ranil Wickremesinghe said on Thursday. 6.

The Economic Crisis The island nation’s worst in seven decades has resulted in severe foreign exchange shortages, halting imports of essential commodities such as fuel, medicine and fertilizer, leading to bankruptcy. prices, inciting street protests and demanding the resignation of the Government.

To resolve the turmoil, Sri Lanka will need about $3.3 billion for fuel imports, $900 million for food, $250 million for gas and $600 million for fertilizer this year, Prime Minister Ranil Wickremesinghe speaking before the Sri Lankan Parliament.

The Sri Lankan central bank estimates that the economy will shrink by 3.5% in 2022. However, Mr. Wickremesinghe is confident that the economy can return to growth with a strong package of reforms and restructuring. debt structure and international support.

Prime Minister Wickremesinghe, who is studying the interim budget, asserts that balancing the troubled public finances is not enough, Sri Lanka must restructure the entire economy: “We need to achieve economic stability by the end of 2023”.

Sri Lanka needs 5 billion USD in the next 6 months to maintain basic living conditions - Photo 1.

Prime Minister and Finance Minister of Sri Lanka Wickremesinghe. (Photo: Reuters)

The Indian Ocean nation of 22 million people is negotiating a loan package worth about $3 billion from the International Monetary Fund, alongside help from countries such as China, India and Japan.

On June 7, the Sri Lankan cabinet approved a credit line of $55 million from India’s Exim Bank to finance 150,000 tons of imported urea, an important commodity in the context of depleted supplies during the crop season. Currently.

While food inflation increased 57% in part due to higher global food prices, a depreciating currency and low domestic production, it is estimated that production from next harvest will be halved due to lack of fertilizer.

According to Wickremesinghe, on June 7, the United Nations will issue a call for support for Sri Lanka around the world and has pledged $48 million in support for food, agriculture and health in the country.

Sri Lanka is also renegotiating with China on the terms of a $1.5 billion yuan swap agreed in 2021.

The initial terms stipulate that the swap can only be applied if Sri Lanka maintains reserves equivalent to three months of imports. However, with reserves now much lower than that, Sri Lanka must ask China to reconsider its request and allow the swap to proceed, Mr. Wickremesinghe said.

Sri Lanka’s Prime Minister and Finance Minister Wickremesinghe will unveil an interim budget next July which he says is aimed at cutting government costs and will likely increase annual welfare spending by 500 million. USD from 350 million USD.

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