Sri Lanka heads for IMF after currency devaluation

Opposition leaders led a march of hundreds of protesters through Sri Lanka’s main city of Colombo on Tuesday amid mounting anger about a worsening economic crisis that has brought fuel shortages and spiralling food prices.

President Gotabaya Rajapaksa’s government said it will begin talks next month with the IMF for assistance, while finance minister Basil Rajapaksa flew into New Delhi to sign a $1bn credit line to tackle the situation.

“Even after working about 14 to 16 hours a day, we still can’t make enough money to support our families,” said rickshaw driver Nissanka Gunewardena, one of the demonstrators marching on a tree-lined boulevard in central Colombo.

“How can anyone live like this?” said Gunewardena, father of two young children who wore a black “Gota Go Home” headband, referring to the president.

Historically weak government finances, badly timed tax cuts and the Covid-19 pandemic, which hit the lucrative tourism industry and foreign remittances, have wreaked havoc on the economy, leading to a currency devaluation last week.

Sri Lanka’s foreign exchange reserves have fallen 70% in the past two years to about $2.31bn, leaving the Indian Ocean island nation struggling to pay for essential imports, including food and fuel.

Last week’s devaluation stoked further inflation, inflicting more distress on Sri Lankans battling rolling power cuts and fuel shortages.

“We have told the government time and again to change their policies,” said Eran Wickramaratne, a leader of the opposition alliance, Samagi Jana Balawegaya.

The government, led by the Rajapaksa brothers, another of whom is Prime Minister Mahinda Rajapaksa, has pushed Sri Lanka’s 22-million people deep into hardship, he said.

“This is the only country in the world where the president and the finance minister have no idea about economic management.”

IMF talks

After months of resistance to seeking IMF help, Rajapaksa’s government said on Tuesday it would begin talks with the multilateral lender next month after cabinet authorised the finance minister to draw up proposals.

Cabinet spokesperson Ramesh Pathirana said the government would firm up plans on IMF assistance in the next few weeks as the finance minister prepares to visit Washington DC in mid-April for the discussions.

In New Delhi this week, the finance minister will sign the $1bn credit line previously agreed with India to bring in key imports of medicine, food and fuel. He will also meet India’s finance and energy ministers.

“Now we are all very disappointed,” said Gunewardena, who said he voted for Rajapaksa in the last presidential election in 2019. “We think this government should go. We want change.”

Reuters