The World Bank provided a lifeline to three failing private banks in Sri Lanka on Monday by lending them $400 million to finance imports of basic food and medicines in light of the collapse of an International Monetary Fund bailout package.
The World Bank’s International Finance Corporation will provide credit to three banks at a time when Sri Lanka is still mired in an economic crisis.
The South Asian nation of 22 million is in deep trouble as it ran out of foreign exchange at the end of 2021 to finance imports of essentials such as food, fuel, medicines and fertilizers. AFP.
Months of protests forced the president to resign in July, and a month later, Ranil Wickremesinghe’s government requested a $2.9 billion aid package from the International Monetary Fund.
But authorities say the package was not released due to the inability of China, Sri Lanka’s main bilateral creditor, to provide financial guarantees.
The International Finance Corporation said the loan agreement reached with Ceylon Commercial Bank, Nations Trust Bank and Sampath Bank will support the private sector with core financing that contributes to the country’s urgent need to stabilize the economy.
Rating agencies have indicated that the entire financial sector of Sri Lanka is under intense pressure after a default on sovereign debt undermined confidence in all local banks.
The government ban on non-essential imports remains in place to save foreign exchange.
Wickremesinghe has doubled taxes and tripled fuel prices and utility rates as required by the International Monetary Fund to boost government revenue before any aid package. As a result, he faces mass protests led by unions.
