Devjyot and Uditha Jayasinghe

COLOMBO (Reuters). Sri Lanka will start talks next month with the International Monetary Fund to discuss a plan of action that would help the nation in crisis, which includes debt restructuring and management of its foreign currency shortage, three sources confirmed on Friday.

Sri Lanka has been facing the worst financial crisis for years. The country’s foreign reserves are just $2.31 billion and it is having trouble paying for essential imports such as fuel, food, and medicine.

After months of resistance by the government and central banks in Sri Lanka and despite repeated calls for assistance from experts and opposition leaders, Sri Lanka has decided to approach IMF for aid.

Two sources familiar with the discussions said that Basil Rajapaksa, Finance Minister of Sri Lanka will be traveling to Washington D.C. to present Sri Lanka’s proposal to IMF senior officials in April.

One source said that they are considering our plan and proposal, but declined to identify themselves as the conversations are confidential. The government is committed to fixing the problems.

It will need to repay approximately $4 billion worth of foreign debt, which includes a $1 Billion international sovereign bond due in July.

Source said that they would discuss the options on the basis of their plans.

Reuters reached Sri Lanka’s finance ministry, but the IMF didn’t immediately reply to queries.

‘TOUGH SITUATION’

The country’s economic health has been ravaged by a combination of poor government finances and poorly timed tax cuts.

The IMF demanded that the government implement a credible and consistent strategy to reduce debt and stabilize macroeconomic conditions in a weekly review.

The IMF stated that the country is facing mounting problems, such as a high level of public debt, low international reserves and persistently high financing requirements in the future years.

According to a source, in order to get out of this crisis, government officials will request assistance for debt restructuring and foreign currency crisis.

The source stated that “This situation is difficult” and suggested, “We would like to receive any support from IMF.”

The country of 22million has been experiencing rolling power cuts in recent weeks. Bakeries are running out of fuel and numerous fuel pumps are dry. The government is facing more problems due to rising oil prices.

On Monday evening, the Central Bank of Sri Lanka introduced a flexible rupee exchange rate. This devalued the currency by around 30%, driving up many of the essential goods’ prices.