The World Bank on Thursday said that it will not offer any fresh funds to Sri Lanka till the island country puts a proper macroeconomic policy framework in place.
“Until an adequate macroeconomic policy framework is in place, the World Bank does not plan to offer new financing to Sri Lanka,” the international financial institution said. “This requires deep structural reforms that focus on economic stabilisation, and also on addressing the root structural causes that created this crisis to ensure that Sri Lanka’s future recovery and development is resilient and inclusive.”
The statement came days after fresh protests erupted amid Sri Lanka’s worst economic crisis since its independence in 1948. As protestors held huge demonstrations and stormed official buildings, Gotabaya Rajapaksa fled from the country and resigned as the president.
Ranil Wickremesinghe took oath as the new president on July 21 and Dinesh Gunawardena was sworn in as the prime minister a day later.
On Thursday, the World Bank said it was deeply concerned about the “dire economic situation” in the island country and its impact on citizens.
“To help alleviate severe shortages of essential items such as medicines, cooking gas, fertiliser, meals for school children and cash transfers for poor and vulnerable households, we are repurposing resources under existing loans in our portfolio,” it said.
The World Bank said that it has disbursed about 160 billion dollars (Rs 12.67 billion) to help Sri Lanka meet urgent needs. “In addition, other ongoing projects continue to support basic services, the delivery of medicine and medical supplies, school meals and tuition waivers,” it said.
The financial institution said that it was working closely with implementing agencies to put in place robust controls in order to ensure that its resources “reach the poorest and most vulnerable”.
Sri Lanka, a country of 22 million people, has run out of foreign exchange reserves limiting essential imports of fuel, food and medicine. The island nation’s inflation rate touched 54.6% year-over-year in June while food inflation shot up to 80%.
The economic meltdown led to Sri Lanka defaulting on its $51-billion (over Rs 4 lakh crore) foreign debt in April. The country is in talks with the International Monetary Fund for a bailout package.