181216 Reuters Ranil Wickremesinghe
Wickremesinghe was sworn in by President Gotabaya Rajapaksa as Minister of Finance and Economic Stabilization and National Policies, according to a statement from the presidential media unit. Image Credit: Supplied

Colombo: Sri Lanka’s newly appointed Prime Minister Ranil Wickremesinghe will double up as finance minister leading bailout talks with the International Monetary Fund.

Wickremesinghe has held talks with foreign envoys, including from India, China and the US, and discussed with representatives from the Asian Development Bank and World Bank ways to replenish food, fertilizer and medicine supplies. Sri Lanka needs $4 billion over the next eight months to pay for essential imports.

Neck deep in debt

The island nation has fallen into default for the first time in its history after the expiry of a 30-day grace period for missed interest payments on two of its sovereign bonds. The country’s central bank also warned that headline inflation will worsen to 40 per cent in the next few months.

The move to appoint Wickeremesinghe as Finance Minister comes as opposition parties refused to take key cabinet roles in the so-called unity government, highlighting the risk of further political instability ahead.

Policy framework

The World Bank said in a statement late Tuesday that it didn’t plan to offer new financing to Sri Lanka “until an adequate macroeconomic policy framework is in place.”

In the meantime, the World Bank is repurposing resources from previously approved projects, to help the government with some essential medicines, temporary cash transfers for poor and vulnerable households, and to support farmers and small businesses.

As a member of the opposition, Wickeremesinghe had criticized the president’s policies, pointing to falling foreign-currency reserves and flagging early on that the government should seek help from the IMF.

Besides scouting for funds and tackling Asia’s highest inflation, he will have to raise taxes to bridge the widening gap between revenue and expenditure.

Sri Lanka’s dollar bond due July was indicated 0.1 cents higher at 42.89 cents on the dollar, set for the third day of gains.