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Author: DW Indonesia
COLOMBO, KOMPAS.com – President Gotabaya Rajapaksa’s decision to ban the import of chemical fertilizers in April 2021 had the impact of drastically cutting crop yields in Sri Lanka.
Now, in the midst of an economic disaster, the government has lifted the ban again and has promised to guarantee the availability of fertilizer in the planting season next September-March.
“Although we no longer have time to import fertilizer this growing season (May-August), steps have been taken to ensure sufficient reserves are available for the next growing season,” Prime Minister Ranil Wickremesinghe said via his Twitter account, Thursday (19/19). 5/2022) night.
Read also: Sri Lanka runs out of gas and can’t import because they don’t have dollars
“I appeal to all citizens to understand the situation.”
President Rajapaksa appointed nine new ministers on Friday (20/5/2022), among others, for positions at the Ministry of Health, Trade and Tourism. Wickremesinghe believes that the function of the finance minister will still be carried out by Wickremesinghe.
Thursday (19/5/2022), the Central Bank of Sri Lanka announced that it had secured a sufficient amount of foreign currency to pay for fuel imports. The money comes from a World Bank loan. However, the supply of gas and oil has not fully recovered.
The economic crisis in Sri Lanka is predicted to raise the inflation rate to around 40 percent in the next few months. The Central Bank said the rise in inflation was driven by supply chain disruptions.
The inflation rate touched 29.8 percent in April, with prices of basic commodities soaring 46.6 percent from a year ago.
Debt negotiation
Sri Lanka this year is required to pay debt installments worth 7 billion US dollars or around Rp. 100 trillion to foreign debtors. However payments were frozen unilaterally while the government in Colombo negotiated with the International Monetary Fund (IMF).
Half of Sri Lanka’s $25 billion debt comes from the private sector. While the rest are loans from the Asian Development Bank (ADB) and Japan. Meanwhile, China is Sri Lanka’s third largest debtor.
Even so, the government in Beijing has the legal power to slow down debt restructuring negotiations.
China has so far vowed to “play a positive role” in negotiations with the IMF on emergency loans. Beijing offered Sri Lanka additional debt, but refused to engage in debt restructuring negotiations.
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Complications from Beijing
“The Chinese government is believed to be reluctant to repay Sri Lanka’s debt because it is concerned about similar requests from other countries borrowing money from its Belt and Road Initiative,” said Sri Lankan economist WA Wijewardena.
“If China makes concessions to Sri Lanka, it should also make similar concessions to other creditors,” he said. “They don’t want to take that risk.”
China’s reluctance to whiten its domestic debt has the potential to hinder negotiations with the IMF, which, among other things, prioritize debt restructuring. The private sector will also be encouraged to resist Sri Lanka’s debt write-off.
“Beijing’s lack of cooperation could make Sri Lanka’s debt recovery more complicated,” said Aditi Mittal of consultancy Verisk Maplecroft.
The Central Bank of Sri Lanka itself insisted on preparing a debt restructuring proposal as a way out of the crisis. “We are currently in a state of bankruptcy,” said Central Bank Governor P Nandalal Weerasinghe.
“Our position is very clear, until there is a debt restructuring, we cannot pay the installments,” he concluded.
Read also: Sri Lankans: We will die, we can do nothing without gas and kerosene
This article was published on DW Indonesia with the title Famine Approaching, Sri Lanka Difficulty Out of Crisis.
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