Cash-strapped Sri Lanka seeks IMF bailout

A lack of foreign currency has left Sri Lanka unable to finance essential imports in what authorities say is the South Asian nation's worst economic crisis since independence from Britain in 1948.

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COLOMBO - Sri Lanka will seek an International Monetary Fund bailout, President Gotabaya Rajapaksa said on Wednesday, as it battles soaring inflation and unprecedented food and fuel shortages.

A lack of foreign currency has left Sri Lanka unable to finance essential imports in what authorities say is the South Asian nation's worst economic crisis since independence from Britain in 1948.

"Subsequent to my discussions with the International Monetary Fund, I have decided to work with them," Rajapaksa said in an address to the nation, after meeting with an IMF delegation on Tuesday.

He added that IMF help was needed to secure "a new method" to repay around $6.9 billion in external debt and sovereign bond repayments due this year.

Long queues outside gas stations and rolling daily blackouts have become the norm, while skyrocketing prices have caused serious hardships among the island's 22 million people.

"The root cause of current issues is our foreign exchange crisis," Rajapaksa said, adding he was aware of the "difficulties" faced by people queuing for food and fuel.

"Today, I am determined to make tough decisions to find solutions to the inconveniences that the people are experiencing," he said.

Sri Lanka's foreign reserves, which sat at $7.5 billion when Rajapaksa took office in November 2019, dropped to $2.3 billion at the end of February.

The coronavirus pandemic hammered the island's tourism sector -- a key foreign exchange earner while foreign worker remittances also declined.

International rating agencies have since downgraded Sri Lanka, effectively blocking its access to commercial borrowings.

They have also raised doubts about Colombo's ability to service its external debt amounting to just over $51 billion.