World Bank refuses new financing for bankrupt Sri Lanka – Business & Finance

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COLOMBO: The World Bank said on Friday it would not offer new financing to Sri Lanka unless the bankrupt island nation carries out “deep structural reforms” to stabilize its collapsing economy.

Sri Lanka has suffered an unprecedented recession with its 22 million people enduring months of food and fuel shortages, power outages and runaway inflation.

The South Asian nation defaulted on its $51 billion foreign debt in April and huge protests earlier this month forced President Gotabaya Rajapaksa to flee the country and resign.

The World Bank said it was concerned about the impact of the crisis on the people of Sri Lanka but was not ready to give funds until the government had put in place the necessary reforms.

“Until an adequate macroeconomic policy framework is in place, the World Bank does not plan to provide new financing to Sri Lanka,” the lender said in a statement.

“This requires deep structural reforms focused on economic stabilization, as well as addressing the root structural causes that created this crisis.”

The World Bank said it had already diverted $160 million from existing loans to fund urgently needed medicine, cooking gas and school meals.

Sri Lanka is currently in bailout talks with the International Monetary Fund, but officials say the process could take months.

The island nation has run out of foreign exchange to fund even the most essential imports, and chronic shortages have inflamed public anger.

Motorists stand in long queues for days to get rationed petrol and government officials have been told to work from home to reduce travel and save fuel.

Inflation hit 60.8% in July for a tenth consecutive monthly record, Colombo Consumer Price Index (ICCP) data showed on Friday, while the Sri Lankan rupee lost more than half its value against the US dollar this year.

The United Nations World Food Program estimates that five out of six Sri Lankan families have been forced to buy lower quality food, eat less or, in some cases, skip meals altogether.

The crisis came to a head on July 9, when tens of thousands of protesters stormed Rajapaksa’s residence, forcing the president to flee to Singapore and resign.

His successor, Ranil Wickremesinghe, declared a state of emergency and pledged a tough line against “troublemakers”, with several activists who helped lead mass protests arrested this week.

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