By Nishat Shuja

Recently, the Sri Lankan PM is seeking $4bn from the IMF and looking forward to fast-track talks with the International Monetary Fund. As Sri Lanka agreed on a loan by mid-June so that it can then approach other lenders for urgently needed funds.

On Wednesday, the Sri Lankan Prime Minister said in an interview at his office in Colombo that the bankrupt nation will reduce its budget expenditure to “bare bones” and hopes to break even or post a primary surplus of 1% of gross domestic product. Even so, that would be smaller than the 2% surplus the IMF has sought, which could be a sticking point.

PM said that Sri Lanka needs to find the dollars as the IMF will not solve the whole economic failure. However, if we start with the IMF, it will induce others to follow the same. The Secretary to the ministry of finance said Sri Lanka was waiting for an IMF staff-level agreement so that the local authorities can “initiate the work on bridging finance.

The government was also looking at “all the choices to increase revenues”. The new PM is seeking a total of about $4 billion this year, from the multilateral financiers and creditors including China and Japan to aid pay for food and fuel.

Removing the food shortages could be the first step to calming public anger that has stoked inflation to almost 40% and generated protests seeking the ouster of the incumbent President. AS Sri Lanka is placing a priority on talks with the IMF it may on track sooner to recover gradually from its financial fiasco.

On Wednesday, Sri Lankan dollar bonds due fell for a fifth straight session to 37.8 cents, remaining deep in suffering. The extra yield investors demand to hold the sovereign debt over US Treasuries was more than 39 percentage points.

The Prime minister who took also the additional role of finance minister forecasted that the economy will shrink 4% this year. He fears citizens will face hard times till February, including food shortages due to a lack of fertilizer ahead of planting season.

Currently, some of them are missing one meal, and a lot of people who had reached the middle class feel that they are in deep abysmal poverty. Furthermore, People are without employment and farmers are without fertilizer for two seasons. Once an IMF deal is agreed the prime minister is also a seek debt restructuring from Beijing as the Chinese interest rates are higher.

In the meantime, the debt, the Sri Lankan PM is also trying to contain anger against the incumbent president. The prime minister has sent to the cabinet a newly drafted, so-called 21st amendment to the country’s constitution, which is expected to slim the wide-ranging powers of the president’s office.

The PM Said that outcome of the amendments would follow discussions among lawmakers and added that he is expecting “the comprehensive possible support” among the political parties of Sri Lanka.

The Bar Association of Sri Lanka has already raised questions about the extent to which the amendments will minimize the sweeping powers of President Rajapaksa shortly after he returned to power in 2019.

The new prime minister replaced the president’s older brother, who quit on May 9 after violence exploded across the country. The New PM is leading a multi-party interim government that is hoped to would bring political stability to the country. As Sri Lanka has to start and repay all the foreign debt it is now into a deep debt burden. So Sri Lanka has to change its economic system to steer the country from its monetary crunch.