Sri Lanka’s worst financial crisis has left it struggling to pay for essentials, including food, fuel and medicines.
The World Bank has agreed to provide Sri Lanka with $600m in financial assistance to help meet payment requirements for essential imports, the Sri Lankan president’s media division has said.
“The World Bank has agreed to provide $600 million in financial assistance to address the current economic crisis,” the media division said in a statement on Tuesday.
The World Bank would release $400m “shortly”, it said.
According to the statement, the World Bank said it would continue to help Sri Lanka to overcome the current economic crisis.
Sri Lanka stocks rallied on the news and the Colombo All-Share Index climbed as much as 4.1 percent, after losing about 15 percent in the past two days. The bluechip S&P Sri Lanka 20 Index surged more than 7 percent. Trading had to be suspended within minutes of the open in the prior two sessions as the S&P gauge fell by its daily set limit.
Sri Lanka’s worst financial crisis since independence in 1948 was caused by a drastic drop in its reserves that dropped 70 percent over the past two years, hitting $1.93bn at the end of March. This left Colombo struggling to pay for essentials, including fuel, medicines and food.
Earlier this month, Sri Lanka kicked off talks with the International Monetary Fund (IMF) for financial assistance. Before the IMF finalises a programme for Sri Lanka, the country needs $3-4bn in bridge financing to help meet its essential expenses.
The Sri Lankan government has also appealed to multiple countries and multilateral organisations for bridge financing until the IMF comes up with its aid.
India has helped Sri Lanka by assisting with $1.9bn, and Colombo is in talks with New Delhi for an extra $1.5bn to fund imports, including fuel.
Sri Lanka is also negotiating with China for up to $1bn in a syndicated loan.
Sri Lanka’s Finance Minister Ali Sabry said Colombo would also seek assistance from the Asian Development Bank.
The country announced a suspension on some of its foreign debt repayments earlier this month and said it would divert its meagre reserves to fund essential imports such as fuel, cooking gas and medicine.