Sri Lanka to receive World Bank aid as economic crisis deepens

Sri Lanka will receive up to $600m from the World Bank over the next four months to buy medicine and other essential goods.

Sri Lanka will receive $300m to $600m from the World Bank over the next four months to buy medicine and other essential items, the country’s finance minister said Friday, as the Indian ocean island suffers its worst economic crisis in decades.

Finance Minister Ali Sabri, who is in Washington to negotiate a rescue package with the International Monetary Fund, said in a video conference that the talks with the IMF might take some time, and that the World Bank has agreed to provide support in the meantime.

Neighboring India has also agreed to provide $500m to buy fuel, and negotiations are under way on an additional $1bn from New Delhi, which has already provided a credit line of $1bn, Sabri said.

Sri Lanka is on the brink of bankruptcy, with nearly $7bn of its total $25bn in foreign debt due for repayment this year. A severe shortage of foreign exchange means the country lacks the money to buy imported goods.

Sri Lankans have endured months of shortages of essentials such as food, cooking gas, fuel and medicine, lining up for hours to buy the limited stocks available.

Fuel prices have risen several times in recent months, resulting in sharp increases in transport costs and prices of other goods. There was another round of increases earlier this week.

The government has announced it is suspending repayment of foreign loans pending the talks with the IMF.

Scores of protesters continued to occupy the entrance to the president’s office for a 14th day Friday demanding President Gotabaya Rajapaksa and his powerful governing family resign over the economic crisis. The protests have spread to several parts of the country, where people have blocked roads with vehicles.

On Tuesday, one person was killed and 13 others were injured when police opened fire on a group of people protesting against the fuel price rise, the first deaths since the protests began.

The shooting has drawn wide condemnation and the government has pledged to conduct an impartial inquiry.

Much of the anger expressed in the weeks of growing protests has been directed at Rajapaksa and his elder brother, Prime Minister Mahinda Rajapaksa, who head an influential clan that has been in power for most of the past two decades. Five other family members are lawmakers, three of whom resigned as Cabinet ministers two weeks ago.

Sabri said the government is also reaching out to China, Japan and the Asian Development Bank for help.

China has already pledged about $31m in emergency aid, including 5,000 tonnes of rice, medicine and raw materials. It earlier said it was mulling a request for $2.5bn in economic assistance including a credit line to buy essentials and a loan.

The debt crisis is partly blamed on projects built with Chinese loans that have not made money.