Sri Lankan President Ranil Wickremesinghe instructs Ministries?

As Sri Lanka’s Treasury was experiencing an severe shortage of funds, President Ranil Wickremesinghe instructed his Ministries to cut 5% of the estimated expenditure. This is in response to fears that the cash-strapped country could face an even greater economic crisis.

Sri Lanka is currently in its worst economic crisis since 1948 when it gained independence from Great Britain. This crisis was triggered by a serious shortage of foreign currency reserves. Sri Lanka declared in April 2012 its international debt default because of the forex crisis.

Bandula Gunawardena, Transport Minister and Cabinet spokesperson, stated that President Wickremesinghe had informed Cabinet that there was a serious shortage of funds.

The ongoing economic crisis of last year has reduced the income that could be earned by taxes in the first months of 2023, Mr. Gunawardena said. He stated that The economic crisis has been worse than we anticipated.

He noted that the President had instructed the Cabinet to trim 5% all proposals from the Ministries in the 2023 budget.

Mr. Gunawarde stated that there have been issues regarding the payment of salaries to government employees for January and February. He also said that the disbursement of the Samurdhi allowance for this month would be delayed by a few weeks.

President Wickremesinghe is also Sri Lanka’s Finance minister. He stated last year that an innovative approach was needed to give impetus to the febrile economic system.

Sri Lanka is trying to obtain a $2.9 Billion bridge loan from International Monetary Fund. It has been trying unsuccessfully to get financial guarantees from its major creditors, China, Japan, and India. This is a requirement for Colombo to receive the bailout package.

Last week, Mr. Wickremesinghe stated that he was optimistic of receiving the IMF bailout package within the first quarter this year. As required by the IMF agreement, Sri Lanka has been in debt restructuring talks since September last year.

Mr. Wickremesinghe stated earlier that India and Sri Lanka had held “successful” talks on debt restructuring, and that the country would also like to start discussions with China.

After Sri Lanka declared its first international debt default in history, the government of Sri Lanka appointed debt advisors and international legal experts to help with debt restructuring. The forex shortage meant that Sri Lanka couldn’t afford to import key commodities like fuel, fertilizers, and medicines. This led to long queues.

Shivi

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