Jorgelina do Rosario and Uditha Jayasinghe

COLOMBO/LONDON – Sources familiar with the situation told Reuters that Sri Lanka has been in discussions with the International Monetary Fund to obtain a minimum of $3 billion through the lender’s extended funds facility (EEF).

According to two sources, the IMF expects the next round of technical talks to take place in June. The government of the Island State hopes to achieve a staff-level agreement by the month’s end, according to the two anonymous sources.

An IMF spokesperson didn’t respond immediately to my request for comment. A request for comment was not answered by spokespersons for the IMF and Sri Lanka’s central bank.

Sri Lanka requested an emergency plan in order to end its most severe economic crisis since 1948, when it gained independence. The country defaulted earlier in the year on some foreign debt and has difficulty paying for basic imports like fuel, medicine and other necessities.

According to the IMF website, an EFF program, which is the 17th IMF plan, calls for countries to implement structural economic reforms to “correct deep-rooted weaknesses.” Once approved, these programmes last for three years and allow for a grace period of four-and-half years to begin repaying the loan.

The country would receive almost four-fifths of its quota from the IMF if it signed a $3 billion agreement.

Although the IMF stated last week that it is in discussions with Sri Lanka regarding a comprehensive reform package, they didn’t give any details about what kind of program was being discussed.

Ranil Wickremesinghe (Prime Minister), took office May following mass protests that forced Mahinda Rajapaksa’s resignation. Wickremesinghe plans to present an interim budget in the next few weeks.

On Tuesday, the government declared a tax overhaul in order to increase revenue. It will raise corporate taxes and raise the value added tax rate (VAT) to 12%. This change takes effect immediately.

Sri Lanka has recently hired legal and financial advisers in order to start talks with bilateral lenders and bondholders, like China and Japan.