Sri Lanka rules out IMF bailout, seeks new China loan

Sri Lanka rules out IMF bailout, seeks new China loan

COLOMBO: Sri Lanka ruled out an IMF bailout yesterday and said it plans to seek another loan from China to address an economic crisis that has led to food and fuel shortages. The island’s tourism-dependent economy has been battered by the pandemic, with supermarkets rationing goods and rolling blackouts imposed by power utilities unable to fund oil imports.

International rating agencies have warned of a looming sovereign default on Sri Lanka’s $35 billion foreign debt as the treasury battles a crunch on foreign exchange reserves and a gaping budget deficit.

But central bank governor Ajith Nivard Cabraal rejected mounting calls from local and international economists to seek an International Monetary Fund bailout and debt restructure. “The IMF is not a magic wand,” he told a news conference in Colombo. “At this point, the other alternatives are better than going to the IMF.”

Cabraal added that talks with China over a new loan were at an “advanced stage”, and a fresh agreement would service existing debt to Beijing. “They would assist us in making the repayments… the new loan coming from China is in order to cushion our debt repayments to China itself,” he said.

Beijing is already the island’s biggest bilateral lender, accounting for