Sri Lanka will have to rely on high interest loans from international capital markets and China with the International Monetary Fund refusing budget support, according to Dr. Harsha de Silva. ‘What this country now needs is neither budget support nor balance of payments support,” opposition legislator Harsha de Silva said.
“What this country need is life support.”
De Silva alleged that the “economic lifeblood of the people of Sri Lanka is being sucked dry” with “front-loaded and unviable projects to the Chinese” and workers’ savings were being used to manipulate stocks for the benefit of a ‘stock market mafia’.
De Silva said his party had pointed out that it was unlikely that the IMF would have given a budget support loan to Sri Lanka.
It seems inevitable that the government has no choice but to go back to high cost and almost choking commercial borrowing and Chinese loans however, with extremely lucrative commissions for the arrangers all of which will have to paid by the 99 percent of the hard working people of this country,” De Silva alleged.
Sri Lanka had said that it will not sell a sovereign bond this year in capital markets, but a state bank is expected to go to the market.
Sri Lanka’s central bank said Tuesday that the IMF had said it will not provide budget support to the island as had been requested by the finance ministry and the monetary authority itself did not need ‘balance of payments’ support.
Analysts had pointed out that there was little actual difference between a loan to boost foreign reserves or direct budgetary support.
A loan to boost reserves allows the monetary authority to run looser domestic policy by avoiding sterilized forex purchases to replenish reserves.
The domestic credit that is then released could be utilized by fiscal authorities for budgetary purposes.
This year Sri Lanka’s central bank has to make a payment of 320.7 million special drawing rights (490 million US dollars) to the IMF.( LBO)