Much of the country’s post-war infrastructure under the administration of former president Mahinda Rajapakse was funded with Chinese debt and the new government had hoped to retire some of those loans.
Finance Minister Ravi Karunanayake travelled to Washington last month to try to secure loans from the International Monetary Fund and the World Bank. But IMF experts who reviewed Sri Lanka’s economy during a nine-day visit said the Indian Ocean island was not facing an immediate crisis.
Delegation leader Todd Schneider said Sri Lanka’s foreign reserves were comfortable compared to 2009, when it obtained a US$2.6 billion bailout at the height of a civil war. “The situation today is quite different,” Schneider told reporters in Colombo. “We only provide balance of payments support.”
Sri Lanka’s economy is among the fastest growing in South Asia.
But the IMF last year warned the island was vulnerable to sudden external shocks due to high levels of foreign commercial borrowings. By the middle of last year, Sri Lanka’s foreign borrowings stood at US$42.4 billion, up from US$39.7 billion at end 2013, a figure the IMF considers high.
The country’s economy grew by a blistering 8.0 per cent in the first two years after the end of a decades-long Tamil separatist war in 2009, but growth has since moderated. The IMF is forecasting a growth rate of 6 to 7 per cent this year, down from an estimated 7.4 per cent last year.(AFP)