By Uditha Jayasinghe

COLOMBO (Reuters), Sri Lanka’s finance Minister stated Friday that India and World Bank have been discussing the possibility of extending approximately $2 billion in bridge financing to Sri Lanka, so it can keep essential imports.

A sharp fall in foreign reserves has caused a drastic drop in the currency reserves. The result is that imports are now more expensive for this country with 22 million inhabitants.

Sri Lanka has $51 Billion of foreign credit and is working to create a larger plan to obtain funds to support it in its worst economic crisis. This includes prolonged power outages and fuel shortages that have led to nationwide demonstrations.

Ali Sabry explained that some creditors have been asked by the government to help restructure their debt. He also suggested reaching out to China, Japan and the Asian Development Bank for support.

India agreed to double the current $500 million credit line to fuel, and Sri Lanka will defer approximately $1.5 billion in import payments to the Asian Clearing Union. The Indian High Commission announced Friday that it had extended the term of the $400 million swap made in January.

Sabry stated that talks with the World Bank were also very positive. He added: “In four to six months, we expect to receive about $500 million from them. This will partly be used for cash transfers to the needy.”

Sabry, a delegation from Sri Lanka is visiting Washington to discuss a program with the International Monetary Fund. According to him, talks have begun about an Extended Fund Facility. However, Sri Lanka still needs $3 billion-$4 billion of bridge financing until the programme is completed.

The strategy is three-pronged. “One is to start an IMF programme, the second to secure financing for bridge projects and third to get Sri Lankan growth on track in about a year,” he stated.

Sabry stated that the government plans to hire financial advisors as well an international firm of lawyers to begin formal debt negotiation with creditors within the next 10-15 days.