Sri Lanka’s reluctance to tap IMF helped push it into an economic abyss - BusinessWorld Online

Sri Lanka’s reluctance to tap the IMF helped push it into an economic abyss, triggering an unprecedented wave of spontaneous protests. READ:

President Gotabaya Rajapaksa’s government has come under growing pressure for its mishandling of the economy, and the country has suspended foreign debt payments in an effort to preserve its paltry foreign exchange reserves.

The pandemic wiped out parts of its economy — mainly the lucrative tourism industry — while an inflexible foreign exchange rate sapped remittances from its foreign workers. By March, Sri Lanka’s reserves stood at only $1.93 billion, insufficient to even cover a month of imports, and leading to spiraling shortages of everything from diesel to some food items.

Newly appointed Finance Minister Ali Sabry told Reuters in an interview earlier this month that key officials within the government and Sri Lanka’s central bank did not understand the gravity of the problem and were reluctant to have the IMF step in. Mr. Sabry, along with a new central bank governor, was brought in as part of a new team to tackle the situation.

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