We will not ignore poor while seeking IMF assistance, Sri Lankan Finance Minister

Ali Sabry heading to the US for talks.

Ali Sabry on his way to the US for talks.

COLOMBO

Sri Lanka’s economic recovery will depend on reforms supported by the IMF, but the government will not ignore the country’s poor, Finance Minister Ali Sabry said.

The recently appointed minister spoke to The Hindu prior to his departure to Washington DC where he will lead the Sri Lankan delegation in negotiations with the International Monetary Fund. “We have seen massive cuts to the country’s revenues and are trying to recover from the current economic crisis. Reforms will be crucial,” he said.

Mr Sabry, who was justice minister in the former cabinet, resigned with his cabinet colleagues in early April, amid mounting pressure from citizens demanding that the president, prime minister and their family members step down in office for “mismanaging” the crisis . President Gotabaya Rajapaksa soon appointed him finance minister in a “new” four-member cabinet. Mr Sabry resigned again, but it was not accepted by the President.

Now that Sri Lanka has decided to default on its foreign debt totaling about $50 billion dollars, Colombo is counting on an IMF program to improve lending opportunities in the international market. Sri Lanka has received support from the IMF at least 16 times in the past.

Speaking about what Sri Lanka would bring to the international financial institution, which is expected to provide support based on difficult circumstances, Mr Sabry said: “We believe there is a need for a poverty reduction programme. We definitely need a safety net for the poor. We cannot ignore the poor,” he said. According to a recent World Bank report on Sri Lanka, the pandemic years saw at least 5 lakh more people fall below the poverty line, due to severe job and income losses.

It remains to be seen how the government, previously reluctant to seek IMF aid, can now reconcile the Fund’s likely terms, fiscal discipline and prudent government spending with growing public outcry.

That the government is feeling the heat was evident in Prime Minister Mahinda Rajapaksa’s recent speech to the nation, asking protesters to be “patient”. Further, in the government’s first public acknowledgment that the president’s abrupt policy change to organic farming had backfired, Mr Mahinda said, “As honorable as the idea of ​​organic fertilizer is, now is not the time to implement it.” . As such, we will reintroduce the fertilizer subsidy,” signaling a complete policy reversal. It would also mean that Sri Lanka would have to set aside about $400 million annually for fertilizer imports.

But indicating that the government was ready to make bold decisions at this point, Mr Sabry said: “We cannot think about partisan politics now that the country needs urgent attention. We must put the future of our country above all else, even if it means taking political risks.”

‘India’s lifeline’

During his stay in Washington DC next week, Mr. Sabry is also scheduled to meet his Indian Finance Minister Nirmala Sitharaman on the sidelines of the Fund’s and World Bank Group’s spring meetings, which begin on April 18. “further potential aid” from India as Sri Lanka grapples with a severe economic downturn, leading to record inflation, severe food shortages and a mass uprising of angry citizens. India has provided $2.4 billion in aid this year and Colombo has asked New Delhi for further assistance, including an additional $500 million credit line for fuel imports and assistance in securing ‘bridge financing’ to meet this year’s import bill. can offer.

“We need about $4 billion to manage our reserves for the rest of the year. We hope to get support from the IMF, the World Bank, bilateral partners such as India and China. India has given us a lifeline and I look forward to discussions with Ms Sitharaman about further possible support from India, our regional leader,” said Mr Sabry.

China recently said it is “studying” a new request from Sri Lanka for $2.5 billion in aid, in addition to the $2.8 billion aid Beijing has provided since the outbreak of the pandemic. Asked about the status of the request, the minister said negotiations were “ongoing”.

www.thehindu.com

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