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A $2 Billion Bridge Loan from India and the World Bank

World Bank

A $2 Billion Bridge Loan from India and the World Bank

Sri Lanka’s finance minister said on Friday that India and the World Bank are mulling a $2 billion bridge loan to keep imports flowing.

Due to a rapid decline in foreign exchange reserves and the resulting depreciation of the currency and subsequent rise in inflation, the 22 million-person country is having difficulty paying for imports.

As a result of protracted power outages and gasoline and medical shortages, Sri Lanka is working on a bigger strategy to gather cash to aid it through its greatest economic crisis.

The government has asked some creditors to restructure its debt and also approached China, Japan, and the Asian Development Bank amongst others for help, Ali Sabry said.

India has already agreed to double a $500 million fuel credit line and delay almost $1.5 billion in import payments due to the Asian Clearing Union. This includes a $400 million swap from January, the Indian High Commission stated Friday.

“Discussions with the World Bank have also been extremely encouraging,” Sabry said,
Sabry is in Washington, D.C., leading a Sri Lankan delegation in negotiations with the International Monetary Fund about a programme for the island nation (IMF). He stated that discussions on an Extended Fund Facility (EFF) had begun, but that Sri Lanka required $3 billion to $4 billion in bridging finance until a programme was finalised. He did not elaborate.
“Our strategy is three-fold. It has three goals: start an IMF programme, acquire bridge finance, and restore Sri Lanka’s growth trajectory in a year or two “
It aims to recruit financial experts and an international legal firm to begin formal debt negotiations with creditors in 10 to 15 days.

 

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