Devjyot and Uditha Jayasinghe

COLOMBO (Reuters – Sri Lanka’s finance minister stated on Saturday that the country will need $3 billion to provide emergency assistance to recover essential goods such as fuel and medicine in order to cope with a severe economic crisis.

A prolonged blackout has left the island nation of 22 millions people without power. Food, fuel, and drugs are all running out, prompting angry protesters to take to the streets. President Gotabaya Rajapaksa is under pressure.

Ali Sabry, the Finance Minister of the Philippines said it is a “herculean task” in his first interview after taking office. This was in reference to the $3 billion needed for bridge funding as the country prepares for talks with the International Monetary Fund.

Sri Lanka is determined to reform international sovereign bonds, seek a moratorium in payments and negotiate with bondholders for a $1 billion payment.

Sabry explained that the entire effort should not be geared towards a hard default. We are well aware of the implications of hard default.

J.P. Morgan analysts have estimated that Sri Lanka’s gross borrowings would be $7 billion and the current account deficit at $3 billion.

Sabry stated that Sri Lanka would seek an additional $500 million Indian credit line for fuel. This will provide enough funds for approximately five weeks’ worth of needs.

Additionally, support would be sought from the Asian Development Bank or the World Bank as well as bilateral partners such China, Britain, Americas, and Middle East countries.

Sabry, who was wearing blue jeans and a T-shirt, stated, “We know what we’re doing, but the only thing that matters is to get back.”

“We don’t have any other option.”

At the end March, Sri Lanka had approximately $1.93 trillion in foreign reserves.

A new governor at the central bank raised interest rates by 700 basis points on Friday to try and stabilize the economy, as well as halt inflation.

Sabry stated that in order to repair the government’s finances Sabry would have to increase tax rates and fuel prices over the next six-months.

He stated that although these measures may not be popular, they were necessary to help the country emerge from its current crisis. But the question is, “Do you continue to go down the drain?”