WORLD BANK OFFERED LIFELINE TO THREE PRIVATE BANKS IN BANKRUPT SRI LANKA

Mon 27 February 2023:

On Monday, the World Bank threw three private banks in bankrupt Sri Lanka a lifeline by giving them $400 million to pay for imports of critical goods like food and medicine while an IMF bailout was on hold.

The International Finance Corporation (IFC), the private sector lending arm of the World Bank, is giving the money to the three because Sri Lanka’s economic crisis is still very much alive.

The South Asian country has been going through terrible challenges since since it ran out of foreign currency to pay for vital supplies including fuel, food, medicine, and fertilizer in late 2021. In April 2022, it fell behind on its payments.

Months of protests forced the president to resign in July and the new government of Ranil Wickremesinghe sought a $2.9 billion rescue from the IMF a month later.

But authorities say it is being held up because Sri Lanka’s main bilateral creditor China has not yet provided financial assurances.

The IFC said its loan arrangement with Commercial Bank of Ceylon, Nations Trust Bank and Sampath Bank will “support the private sector with critical financing, contributing to the country’s urgent need to stabilise the economy”.

Ratings agencies have stated that Sri Lanka’s whole financial sector is experiencing extreme stress, with the default on the nation’s debt eroding confidence in all local banks.

A government ban on non-essential imports remains in place in a bid to save foreign exchange.

In accordance with IMF requests to increase government revenue prior to a bailout, Wickremesinghe has doubled taxes, tripled fuel prices, and utilities rates. As a result, he is dealing with significant trade union protests.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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