The balance of payments crisis-hit Sri Lankan Government has already requested for a USD 1-3 billion concessional loan from the Japanese Government, a top government official told Finance Today.
“The President of Sri Lanka Gotabaya Rajapaksa has submitted a request to the Prime Minister of Japan recently. I believe Japan will soon be able to provide at least USD 1 billion as soon as possible,” he said.
The Japanese Ambassador to Sri Lanka has already visited Japan to formalise the matter.
In addition, steps are being taken to raise another USD 3 billion through a Sri Lanka-Japan business alliance through their private sector fundraising strategies.
“Sri Lanka needs a few more bridge financing options to close the funding gap until a programme with the International Monetary Fund (IMF) takes effect,” he said.
According to the Central Bank of Sri Lanka (CBSL), it will take at least three to six months to finalise an IMF arrangement subject to local political conditions.
Sri Lanka is, therefore, considering another USD 1 billion swap facility with the Reserve Bank of India.
In addition, talks are underway to obtain an additional USD 500 million in short-term loan assistance from India for petroleum imports.
Of the USD 1 billion loan previously approved by India,
Sri Lanka has so far drawn some USD 300 million for the import of consumer goods. The rest will be used for other essential imports, including petroleum.
In this connection, India has to complete several time-consuming regulatory processes for their petroleum products to reach Sri Lanka.
In addition, the Government is looking at the possibility of unconditionally converting the Yuan-denominated USD 1.5 billion swap facility currently available with China into a medium-term soft loan.
In another concession, China has recently agreed to refinance its maturing USD 1 billion loan, although tenor and rates are unknown. Sri Lanka, however, has so far declined the refinancing facility, as it has decided to restructure all of its foreign debt, including bilateral arrangements on the principle that all external debtors are treated equally.
Sri Lanka has also applied for USD 100 million in emergency funding through the Chinese-led Beijing-based Asian Infrastructure Investment Bank (AIIB), where Sri Lanka is also a participant. The Chinese Embassy in Colombo, however, says such financing could take at least six months to finalise.
Thus, the Government is focusing on the possibility of obtaining this urgent funding requirement from the World Bank.
Prime Minister Ranil Wickremesinghe this Sunday (15) met with the World Bank Country Manager in Sri Lanka, Chiyo Kanda and ADB Country Director in Sri Lanka Chen Chen to discuss the ongoing economic crisis.
The discussions have focused on securing assistance for the supply of food, medicine, and fertiliser to Sri Lanka.
Speaking further PM Wickremesinghe said, “The problem we have now is to procure fuel required for the energy sector next week,” adding that the Government is now seeking alternative methods to secure funding for this purpose as banks in the country are faced with shortages of US dollars.
By Ishara Gamage