Sri Lanka says no to IMF, seeks new China loan

[beijingwalker]

Sri Lanka says no to IMF, seeks new China loan

ByAFP

12 January 2022

Sri Lanka ruled out an IMF bailout on Wednesday and said it plans to seek another loan from China to address an economic crisis that has led to food and fuel shortages.

The island’s tourism-dependent economy has been battered by the pandemic, with supermarkets rationing goods and rolling blackouts imposed by power utilities unable to fund oil imports.

International rating agencies have warned of a looming sovereign default on Sri Lanka’s $35 billion foreign debt as the treasury battles a crunch on foreign exchange reserves and a gaping budget deficit.

But central bank governor Ajith Nivard Cabraal rejected mounting calls from local and international economists to seek an International Monetary Fund bailout and debt restructure.

“The IMF is not a magic wand,” he told a news conference in Colombo. “At this point, the other alternatives are better than going to the IMF.”

Cabraal added that talks with China over a new loan were at an “advanced stage”, and a fresh agreement would service existing debt to Beijing.

“They would assist us in making the repayments… the new loan coming from China is in order to cushion our debt repayments to China itself,” he said.

Beijing is already the island’s biggest bilateral lender, accounting for at least 10 percent of Sri Lanka’s external debt.

Cabraal’s remarks come days after a visit from Chinese Foreign Minister Wang Yi who discussed a debt payment restructure with President Gotabaya Rajapaksa.

https://www.globalvillagespace.com/sri-lanka-says-no-to-imf-seeks-new-china-loan/

 

[KrimesKaster]

Sri Lanka says no to IMF, seeks new China loan

ByAFP

12 January 2022

Sri Lanka ruled out an IMF bailout on Wednesday and said it plans to seek another loan from China to address an economic crisis that has led to food and fuel shortages.

The island’s tourism-dependent economy has been battered by the pandemic, with supermarkets rationing goods and rolling blackouts imposed by power utilities unable to fund oil imports.

International rating agencies have warned of a looming sovereign default on Sri Lanka’s $35 billion foreign debt as the treasury battles a crunch on foreign exchange reserves and a gaping budget deficit.

But central bank governor Ajith Nivard Cabraal rejected mounting calls from local and international economists to seek an International Monetary Fund bailout and debt restructure.

“The IMF is not a magic wand,” he told a news conference in Colombo. “At this point, the other alternatives are better than going to the IMF.”

Cabraal added that talks with China over a new loan were at an “advanced stage”, and a fresh agreement would service existing debt to Beijing.

“They would assist us in making the repayments… the new loan coming from China is in order to cushion our debt repayments to China itself,” he said.

Beijing is already the island’s biggest bilateral lender, accounting for at least 10 percent of Sri Lanka’s external debt.

Cabraal’s remarks come days after a visit from Chinese Foreign Minister Wang Yi who discussed a debt payment restructure with President Gotabaya Rajapaksa.

https://www.globalvillagespace.com/sri-lanka-says-no-to-imf-seeks-new-china-loan/

Its actually the other way round...
IMF will put too many restriction on them (which are required, given their precarious debt situation). They have decided to dig the hole deeper.

 

[beijingwalker]

Its actually the other way round...
IMF will put too many restriction on them (which are required, given their precarious debt situation). They have decided to dig the hole deeper.

China is also a major shareholder of IMF.

 

[KrimesKaster]

China is also a major shareholder of IMF.

US + Japan + UK dominate IMF. China holds a third of shares of USA. For comparison, India + UK put together hold more shares.

 

[beijingwalker]

US + Japan + UK dominate IMF. China holds a third of shares of USA. For comparison, India + UK put together hold more shares.

China is posing to become the second biggest holder soon, and China is more rich than IMF and can beat IMF in global overseas lending if not already did.

 

[KrimesKaster]

China is posing to become the second biggest holder soon, and China is more rich than IMF and can beat IMF in global overseas lending if not already did.

Cross that bridge when you reach there. Right now, China does not control IMF.

 

[lcloo]

Indonesia had a very bad experience with IMF during the Asian Financial crisis. On the other hand, Malaysia rejected IMF loans, and did better at recovery.

How the IMF helped create
and worsen the Asian financial crisis​

The late 1990s Asian meltdown was caused in large part by South Korea, Thailand, the Philippines, Malaysia and Indonesia's heavy reliance on short-term foreign loans and openness to hot money -- a reliance that came from following advice proferred by the U.S. Treasury Department, the IMF and other international sources of "expertise."

When it became apparent in 1997 that private enterprises in those nations would not be able to meet their payment obligations, international currency markets panicked. Currency traders sought to convert their Asian money into dollars, and the Asian currencies plummeted. That made it harder for the Asian countries to pay their loans, and it made imports suddenly very expensive.

There were other underlying causes for the financial crisis, including overinvestment in real estate and other speculative and unnecessary ventures, but almost everyone agrees the currency crash and financial disaster were vastly disproportionate to the weaknesses in the Asian economies.

Having contributed in important ways to the development of the crisis, the IMF proceeded to make it worse.

The IMF treated the Asian financial crisis like other situations where countries could not meet their balance of payment obligations. The Fund made loan arrangements to enable countries to meet foreign debt payments (largely to private banks in these cases) on the condition that the recipient countries adopt structural adjustment policies.

But the Asian crisis differed from the normal situation of countries with difficulties paying off foreign loans. For example, the Asian governments were generally not running budget deficits. Yet the Fund instructed them to cut spending -- a recessionary policy that deepened the economic slowdown.

As former World Bank Chief Economist Joseph Stiglitz explains in a New Republic article, "I thought this was a mistake. For one thing, unlike the Latin American nations, the East Asian countries were already running budget surpluses. In Thailand, the government was running such large surpluses that it was actually starving the economy of much-needed investments in education and infrastructure, both essential to economic growth. And the East Asian nations already had tight monetary policies, as well: inflation was low and falling. (In South Korea, for example, inflation stood at a very respectable four percent.) The problem was not imprudent government, as in Latin America; the problem was an imprudent private sector--all those bankers and borrowers, for instance, who'd gambled on the real estate bubble.'

The Fund also failed to manage an orderly roll over of short-term loans to long-term loans, which was most needed; and it forced governments, including in South Korea and Indonesia to guarantee private debts owed to foreign creditors.

In retrospect, even the IMF would admit that it made things worse in Asia.

Malaysia stood out as a country that refused IMF assistance and advice. Instead of further opening its economy, Malaysia imposed capital controls, in an effort to eliminate speculative trading in its currency. While the IMF mocked this approach when adopted, the Fund later admitted that it succeeded. Malaysia generally suffered less severe economic problems than the other countries embroiled in the Asian financial crisis.

The result of the Fund's bungling has been intensified and needless human
suffering.

In South Korea, a country whose income approaches European levels, unemployment skyrocketed from approximately 3 percent to 10 percent. "IMF suicides" became common among workers who lost their jobs and dignity.

In Indonesia, the worst hit country, poverty rates rose from an official level of 11 percent before the crisis to 40 to 60 percent in varying estimates. GDP declined by 15 percent in one year.

In September 1998, UNICEF reported that more than half the children under two years old in Java, Indonesia's most populous island, were suffering from malnutrition.

At one point, the food shortage became so severe that then-President B.J. Habibie implored citizens to fast twice a week. Many had no choice.

 

[Beidou2020]

China can fund these countries. Should use yuan.

 

[ARMalik]

Its actually the other way round...
IMF will put too many restriction on them (which are required, given their precarious debt situation). They have decided to dig the hole deeper.

Says a panjeet.

 

[ARMalik]

Well at least the Sri Lankans are smarter than the dummies sitting in Government of Pakistan.

 

[KrimesKaster]

Says a panjeet.

Well, you are a pajeet actually. A poor one that is.

 

[zhxy]

And then, he will declare it as China debt trap, and blame China. Western media will use this opportunity to insult China.

Maybe this is the beginning for the Clears port deal 2.0

 

[samv]

Better for Sri Lanka not to go to IMF.

May eventually have to, however while able to manage without they should not go to the IMF.

 

[Stranagor]

Its actually the other way round...
IMF will put too many restriction on them (which are required, given their precarious debt situation). They have decided to dig the hole deeper.

IMF usually asks for neoliberal policies of deregulation, privatization, wage freeze, strict fiscal discipline. Basically, those policies hit the poor and lower classes. Fiscal balance eventually reached but at the cost of the regular working people.

And then, he will declare it as China debt trap, and blame China. Western media will use this opportunity to insult China.

Maybe this is the beginning for the Clears port deal 2.0

Haha, that was what crossed my mind. China should make them sign a disclosure, stating the government makes that decision on its own volution. This is not to allow USindian media to have a field day later on.

 

[KrimesKaster]

IMF usually asks for neoliberal policies of deregulation, privatization, wage freeze, strict fiscal discipline. Basically, those policies hit the poor and lower classes. Fiscal balance eventually reached but at the cost of the regular working people.

Austerity measures. For a country that has been accumulating so much debt in white elephant projects, it seems the right approach. To be honest, all those development did not have anything economically to support. Some pain now is required to fix the situation.