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IMF, Bangladesh rush financial assistance to Sri Lanka amid economic emergency

Sri Lanka’s President Gotabaya Rajapaksa

Sri Lanka, which has declared an economic emergency after its sharp fall in its currency and surge in food prices, has received $787 million from the International Monetary Fund’s (IMF) special drawing rights (SDR) allocation. That apart Bangladesh, too has rushed to provide financial assistance.  Dhaka extended $150 million from Bangladesh Central Bank under a currency swap arrangement.

Sri Lankan banks too have run out of foreign exchange that is required to finance the country’s imports.

On Tuesday, Sri Lanka’s President Gotabaya Rajapaksa declared a state of emergency with the aim of preventing hoarding of essential items which including rice and sugar. The President has appointed (Retd) Maj. Gen. M. S. P. Nivunhella as commissioner general of essential services to oversee the necessary coordination for the supply of essentiall items.

Also read: SL health system on alert over new Covid variant

The Covid 19 pandemic has dealt a huge blow to the economy of the island nation, which has been facing challenges for sometime now. By July end, the country’s foreign exchange reserves had dropped to a mere $2.8 billion.

An AFP report said that the Rajapaksa government increased penalties for food hoarding, “but the shortages come as the country of 21 million battles a fierce coronavirus wave that is claiming more than 200 lives a day.”

According to the report, importers are still unable to source dollars to pay for the food and medicines they are allowed to buy.

Meanwhile, in a bid to discourage people from withdrawing money, the Central Bank of Sri Lanka has also increased interest rates.

The economy shrank by a record 3.6 percent in 2020 because of the pandemic and in March last year the government banned imports of vehicles and other items, including edible oils and turmeric, an essential spice in local cooking, in a bid to save foreign exchange.

Sri Lanka’s liabilities relating to foreign debt payments this year is estimated at $3.7 billion, It has paid $1.3 billion so far.