No funding without reforms: WB to Lanka

Tribune News Service

New Delhi, July 29

The World Bank has declined to offer new funding to cash-strapped Sri Lanka till it carries out “deep structural reforms” to stabilise its economy.

Banking on India

• Sri Lanka is in talks for a loan from IMF, but process will take months
• With China unwilling to lend, India appears to be the last resort for Lanka

The World Bank said it was concerned about the impact of the crisis on Sri Lanka’s people, but was not ready to give funds until the government had bedded down necessary reforms.

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

“This requires deep structural reforms that focus on economic stabilisation, and also on addressing the root structural causes that created this crisis.”

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

The World Bank’s conditions have implications for the survival of the current regime because it will have to remove some of the subsidies such as on fuel. This will increase the prices of some essentials which could in turn stoke anger against the government that is seen as a carryover of the previous regime minus members of the Rajapaksa clan.

Sri Lanka has already defaulted on its $51-billion foreign debt which led to huge protests that led President Gotabaya Rajapaksa to flee the country.

Sri Lanka is in talks for a loan from the International Monetary Fund but this process will take months. With China also unwilling to lend till Sri Lanka announces a plan to restructure debts owed to Beijing, India appears to be the country of last resort for Sri Lanka.

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