Delay, Doubt, Difficulties and Uncertainty in Foreign Aid | Print edition

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Foreign aid is urgently needed for the economic survival of the country. This should be followed by an Extended Financing Facility (EFF) from the International Monetary Fund (IMF) to stabilize and revive the economy.


There is currently great uncertainty about the prospect of the country securing bridge financing which is vital for the country’s economic survival. There is also uncertainty about IMF approval of an Extended Financing Facility (EFF).

Bridging financing

There is considerable uncertainty about obtaining the transition financing needed immediately to keep the economy functioning. The country has reached a virtual shutdown state with no diesel, gasoline, kerosene and cooking gas.

Foreign aid is urgently needed for the survival of the country.

The economy is almost at a standstill without diesel for agricultural and industrial production and the transport of workers, goods and services.

Tea production is hampered with no transportation of green leaves and closing of factories due to lack of fuel. Industries came to an abrupt halt. Livelihoods are threatened and hunger and starvation are on the rise.

Humanitarian aid

Fortunately, there is humanitarian aid from international organizations such as the United Nations World Food Program and UNICEF, and from several countries. However, there is no financial assistance to strengthen the country’s reserves in order to import basic necessities.

Fuel imports

There is considerable uncertainty about how and when to obtain sufficient fuel supplies. There was a glimmer of hope that the government had obtained fuel from Malaysia and was expecting fuel from India.


Still, there was skepticism that the fuel would arrive, as recent expectations for fuel shipments did not materialize. Given recent experiences of such expectations not being realized, there were doubts and uncertainties about their materialization.

no fuel

As I write on Wednesday June 6, news has just arrived that the shipment from Malaysia has been cancelled.


Previous chronicles have emphasized that the immediate need is assistance for the survival of the country. Funds are needed to import the basic necessities of food and fuel for livelihoods and for the functioning of the economy which has come to a screeching halt.

This aggravated economic difficulties and deteriorated the country’s balance of payments and foreign exchange reserves.


Prospects of mass hunger and starvation must be averted by providing food to those who have no income. Several international organizations, countries and voluntary organizations, and even individuals, have pledged to support food aid.

Among them are the World Bank, UNICEF and the World Food Program (WFP). These initiated programs to provide food to the needy.


The United States, Japan, Britain, Canada, China and India, among others, have pledged aid to relief programs or donated food. This is particularly the case for food aid from China and India.

Indian aid

India’s aid, amounting to more than three billion dollars, has been substantial and multifaceted. He averted food shortages and stimulated the economy.

However, the time has come when people in India wonder how Sri Lanka will be able to repay the credit granted to them. Therefore, a decrease in Indian aid is likely.


The most significant and longest-lasting financial assistance was expected from the IMF. The government expected him to provide sufficient bridging funding to overcome the severe difficulties facing the country. This was to be followed by an arrangement to have an EFF.


The government has recognized that such an arrangement with the IMF would require the imposition of tough conditions that would include monetary, fiscal and structural reforms of the economy. Therefore, a delay in obtaining the FEP was expected.

However, the prospect of such assistance has been clouded by the IMF condition that the country must demonstrate the sustainability of debt repayment.

Debt sustainability

Given an external debt of over US$51 billion and a repayment obligation of around US$5 billion per year on average over the next five years, this is a difficult condition. fill.

IMF statement

The IMF’s statement at the end of the June 30 consultations foreshadows many difficulties. While declaring his willingness to provide assistance, he stressed the need for debt sustainability, accountability, transparency, adoption of internationally accepted good practices and elimination of corruption.

Final statement

The IMF statement at the end of the consultations indicates that “discussions focused on designing a comprehensive economic program to correct macroeconomic imbalances, restore public debt sustainability and realize Sri Lanka’s growth potential. Discussions progressed considerably during the mission, particularly on the need to reduce the high budget deficit while ensuring adequate protection for the poor and vulnerable.

“Given the low level of revenue, far-reaching tax reforms are urgently needed to achieve these goals. Other challenges include containing rising inflation, tackling severe balance of payments pressures, reducing vulnerabilities to corruption, and embarking on growth-enhancing reforms.

Can the current government fulfill these conditions?


The reference to reducing corruption is intriguing. The IMF statement implied that the Sri Lankan government was corrupt and did not follow responsible good practices.

United States

Shortly thereafter, on June 2, the United States Foreign Relations Committee declared: “Any agreement with Sri Lanka must be conditional on the independence of the CBSL (Central Bank of Sri Lanka), on measures against -strong corruption and the promotion of the rule of law. Without these physical reforms, Sri Lanka could still suffer from economic mismanagement and uncontrollable debt.


This position of the United States would not only influence the IMF. It can also influence other countries like Canada, Great Britain, Japan and Australia, as well as the European Union (EU).

The implication of this position is that the country does not have a credible government to which funds could be entrusted and which would implement reforms.

The crucial question is whether there is a government in Sri Lanka that can inspire international confidence. The answer is surely no.

No trust

It is because we have a government that has lost confidence that western governments have been careful to add a caveat when they choose to provide humanitarian aid saying “to help the people of Sri Lanka”.

The latest is Canada, which channels its aid through international agencies. Great Britain too. US and IMF aid must be channeled in a way that ensures accountability.


The need for significant fiscal reforms that will increase government revenue and reduce government spending is imperative. The need to reform public enterprises is an essential element of these reforms. Can the current government implement such reforms?

The severity of the hardships and the inevitable unpopularity of the reforms will be seized upon by the opposition to discredit the government. This will increase the current overwhelming unpopularity of the President and his government. It will also make the next government powerless to implement reforms and revive the economy. This is the doomsday scenario facing the country.


Only a multi-party national government made up of competent ministers in a compact cabinet of around 15 ministers could enact the necessary economic reforms and secure much-needed international assistance. Is it possible ?

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