Sri Lanka to receive World Bank help to face economic crisis

Sri Lankans shout slogans at the ongoing protest site against the economic crisis outside the president's office in Colombo, Sri Lanka. Photo / AP

Sri Lanka will receive US$452 million to US$905m from the World Bank over the next four months to buy medicine and other essential items, the country's finance minister said, 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.

Neighbouring India has also agreed to provide US$754m ($1.137 billion) to purchase fuel, and negotiations are under way on an additional US$1.5b from New Delhi, which has already provided a credit line of US$1.5b, Sabri said.

Sri Lanka is on the brink of bankruptcy, with nearly US$10.5b of its total US$37.7b 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 the 14th day on Friday, demanding that President Gotabaya Rajapaksa and his powerful ruling 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 hike, in 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 have been directed at Rajapaksa and his elder brother, Prime Minister Mahinda Rajapaksa, who heads 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 US$46m in emergency aid, including 5000 tonnes of rice, medicine and raw materials. It earlier said it was mulling a request for US$3.7b 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.