COLOMBO: The World Bank announced on Friday that it would not extend new financing to the island nation of Sri Lanka unless it implemented “deep structural reforms” to stabilise its collapsing economy.
With its 22 million residents enduring months of food and fuel shortages, rolling blackouts, and escalating inflation, Sri Lanka has experienced an unprecedented downturn.
Massive protests earlier this month forced the country’s former president, Gotabaya Rajapaksa, to flee and resign after the South Asian country went into default on its $51 billion foreign debt in April.
The World Bank stated that while it was concerned about how the crisis was affecting Sri Lankans, it was not yet prepared to provide funding until the required reforms had been implemented by the government.
The World Bank stated in a statement that it has no plans to provide new financing to Sri Lanka until an adequate macroeconomic policy framework is in place.
This calls for extensive structural changes that prioritise economic stabilisation as well as addressing the underlying factors that contributed to the crisis.
The World Bank reported that it had already diverted $160 million from existing loans to pay for critically needed supplies like cooking gas, school lunches, and medications.
The International Monetary Fund (IMF) and Sri Lanka are currently in bailout negotiations, but officials warn that it could take months.
The island nation lacks the foreign currency to pay for even the most basic imports, and ongoing shortages have stoked public resentment.
Government officials are instructed to work from home in order to reduce commuting and save fuel, while motorists wait in days-long lines to purchase rationed gasoline.
According to data from the Colombo Consumer Price Index (CCPI) released on Friday, inflation increased to 60.8 percent in July for a tenth consecutive monthly record, while the Sri Lankan rupee has lost more than half of its value against the US dollar this year.
Five out of every six Sri Lankan families, according to the UN World Food Programme, have been forced to buy lower-quality food, eat less, or in some cases skip meals entirely.
Tens of thousands of protesters stormed Rajapaksa’s home on July 9, forcing the president to flee to Singapore and escalating the crisis.
