COLOMBO: The World Bank has offered a lifeline to three private banks in bankrupt Sri Lanka on Monday, lending them $400 million to finance imports of essential food and medicines with an IMF bailout stalled.

The World Bank’s private sector funding arm, the International Finance Corporation (IFC), is lending the trio the funds with Sri Lanka’s economic crisis still rumbling on.

The South Asian nation of 22 million has been enduring severe hardships since it ran out of foreign exchange to finance essential food, fuel, medicines and fertiliser in late 2021. It defaulted on its debt in April 2022.

Months of protests forced the president to resign in July and the new government of Ranil Wickremesinghe sought a $2.9 billion rescue from the IMF a month later.

But authorities say it is being held up because Sri Lanka’s main bilateral creditor China has not yet provided financial assurances.

The IFC said its loan arrangement with Commercial Bank of Ceylon, Nations Trust Bank and Sampath Bank will “support the private sector with critical financing, contributing to the country’s urgent need to stabilise the economy”.

Ratings agencies have said Sri Lanka’s entire financial sector was under severe stress, with the sovereign debt default undermining the credibility of all local banks.

A government ban on non-essential imports remains in place in a bid to save foreign exchange.

Wickremesinghe has doubled taxes and raised fuel prices and utility tariffs three-fold in line with IMF demands to raise government revenue before a bailout. He is facing widespread trade union protests as a result.

Published in Dawn, February 28th, 2023