Sri Lanka seeks IMF bailout as Central Bank sells US$ 372mn

Special cabinet meeting has been arranged today to decide whether the Sri Lankan government should seek IMF assistance to get out of the economic crisis.

“Restructuring of debts is a must. Government should first announce a temporary suspension on debts and should look for ways and means which will minimize the suffering of people,” SJB MP Harsha de Silva told a joint press conference.

“Government should have sought IMF assistance months ago when we suggested it,” Sri Lanka’s debt services for the next six weeks is $ 1440 million which includes payments in relation to development, sovereign bonds, and other obligations which include $ 200 million development bonds and several other obligations.

The annualized yield of international sovereign bonds had risen to more than 180 percent. “Who would purchase sovereign bonds at such a rate?” he questioned.

Meanwhile, The Sri Lankan Central Bank sold US$ 372.35 million in November to defend the rupee—a record high in recent years—reflecting the seriousness of the foreign currency liquidity crisis Sri Lanka is currently in.

According to the latest data, the Central Bank sold US$ 372.35 million in foreign exchange and bought US$ 61.71 million from the domestic foreign exchange market in November, staying as a net seller of foreign exchange for the second consecutive month.

In October, after months of being a net absorber or buyer of foreign currency from the market, the Central Bank turned a net seller of US$ 72.32 million worth of foreign currency.  Sri Lanka’s rupee came under heavy pressure since June this year when the envisaged inflows started drying up while the excess money came out of monetary stimulus that resulted in higher imports.

This created a shortage in the dollar liquidity in the domestic foreign exchange market, which resulted in parallel exchange rates, exacerbating the country’s external sector woes.

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