Sri Lanka’s present economic turbulence might have been prevented if the government had sought a bailout from the International Monetary Fund (IMF) sooner, according to the country’s central bank governor.
The delay in seeking outside support, according to P Nandalal Weerasinghe of BBC Newsnight, was a mistake.
The country has stated that it requires $5 billion in assistance from the international community this year, including the IMF.
Last month, Sri Lanka defaulted on its foreign debt for the first time in its history.
“We could have managed the issue without this sort of hardship in this nation if we had taken the choice to go to the IMF sooner, if we had begun the debt resettlement process one year earlier,” he stated.
His remarks come as he tries to bring order to Sri Lanka’s economy, which is suffering from severe fuel shortages, increasing food costs, and a dearth of medications.
According to a recent UN World Food Programme study, over two-thirds of Sri Lankan households have been compelled to limit their food intake.
Mr. Weerasinghe stated that Sri Lanka is in the midst of its biggest economic crisis since gaining independence from the United Kingdom in 1948.
On Monday, a delegation from the International Monetary Fund (IMF) will arrive in Colombo for negotiations, and Mr Weerasinghe will be a crucial participant.
However, it is unclear if Mr Weerasinghe, who took over from outgoing governor Ajith Nivard Cabraal in April, would be reappointed for another six-year term at the end of the month.
He stated, “I have conveyed my wish to continue.”
“I don’t believe I expected to be simply serving for two months and then returning when I took over. I would not have came in if that was the case… This is not a problem that can be solved in two months. It will deteriorate before improving.”
Sri Lanka’s large borrowing from China, which Mr Weerasinghe claims represents for 15% of the country’s total foreign debt, has complicated the IMF discussions.
The IMF has a policy of not bailing out nations unless all of its other creditors agree to write down their debts first.
“I’m certain that China, as a close ally of Sri Lanka, would provide similar assistance to that which will be provided by other creditors,” Mr Weerasinghe added.
Former members of Sri Lanka’s central bank have sent an open letter to President Gotabaya Rajapaksa encouraging him to maintain Mr Weerasinghe in office.
“We consider it as a highly unpatriotic move with wholly ulterior objectives if anyone is contemplating removing him from his post as Governor of the Central Bank of Sri Lanka,” they said.
According to the World Bank, as many as 12 additional developing countries are at risk of defaulting this year.
According to analysts, the Maldives, Rwanda, Ethiopia, and Senegal are all on the verge of financial collapse.
Egypt, Ghana, and Pakistan are also thought to be quite vulnerable.