World Bank says not ready to offer new financing to Sri Lanka

Sri Lanka has been facing a crippling economic crisis

The World Bank does not plan to offer new financing to cash-strapped Sri Lanka until an adequate macroeconomic policy framework is in place, it said in a statement on Friday.

The Washington-based lender said that it is “deeply concerned” and stressed that the island nation needs to enact structural reforms that focus on economic stabilisation and address the “root structural causes that led to the crisis”.

Sri Lanka has been facing the worst economic crisis since the country gained independence in 1948, leaving people short of food and fuel.

Nearly $160m in funds has been disbursed to meet urgent needs such as medicines, cooking gas and school meals, the World Bank said.

“We are working closely with implementing agencies to establish robust controls and fiduciary oversight to ensure these resources reach the poorest and most vulnerable.

“We will continue to monitor this closely. We are also coordinating closely with other development partners to maximize the impact of our support for the people of Sri Lanka,” it added.

The nation of 22 million people is suffering a severe foreign exchange shortage which has limited essential imports of fuel, with the shortage forcing school closures and rationing for essential services.

Earlier this week, the United Nation’s child body stated that more than 5.7 million people, including 2.3 million children, are in need of immediate humanitarian assistance.

The bankrupt south Asian country has suspended repayment on its $51bn foreign loans, of which $28bn must be paid by 2027.

It is currently in negotiations with the International Monetary Fund (IMF) for a £3bn bailout package, having earlier secured commitments from India and the World Bank for billions of dollars in support.

The financial meltdown has led to thousands of people taking to the streets in protest against the government for the poor management of the economy.

The protest, which intensified earlier this month with demonstrators storming into Gotabaya Rajapaksa’s official residence, forced the president to resign and flee the country.

Veteran politician Ranil Wickremesinghe, who is known for his strong diplomatic ties, was elected as the new president.

Sri Lanka’s parliament on Wednesday approved a state of emergency that had been declared by Mr Wickremesinghe after his government initiated a crackdown on demonstrators.

The decree, which gives the president the power to make regulations in the interest of public security and order, has to be approved every month.