The prime minister says the country's financial legal advisers are working on a debt sustainability report amid the additional challenges of bankruptcy.
Crisis-hit Sri Lanka will present a debt restructuring plan to the International Monetary Fund (IMF) by the end of August in a bid to win approval for a four-year funding programme, the country's prime minister has said.
The country's negotiations with the IMF are more complex and difficult than in the past because it is a bankrupt nation, Prime Minister Ranil Wickremesinghe said on Tuesday.
"We are now participating in the negotiations as a bankrupt country," he said, referring to the talks with the global lender. "Therefore, we have to face a more difficult and complicated situation than previous negotiations."
Speaking after a recent visit by an IMF delegation, Prime Minister Wickremesinghe outlined a road map in parliament to chart a way out of the crisis for the Indian Ocean island.
Economic mismanagement and the aftermath of Covid-19 have left the cash-strapped country of 22 million people unable to pay for essential imports of food, fertiliser, medicines and fuel because of a severe dollar crunch.
This week, authorities extended a closure of schools, told public servants to work from home and limited fuel distribution to essential services as the country struggles to pay for new fuel shipments.
Inflation reached 54.6 percent in June as the Indian Ocean nation battles its worst economic crisis in decades, and the central bank is expected to raise rates at its next policy announcement on Thursday to rein in prices.
Sri Lanka's Power and Energy Minister Kanchana Wijesekera warns the country will run out of fuel in less than a day as it struggles to raise $587 million to pay for about half a dozen fuel shipments pic.twitter.com/kfwgkFYZJE— TRT World Now (@TRTWorldNow) July 4, 2022
Despite a suspension of repayments on about $12 billion of foreign debt in April, Wickremesinghe said Sri Lanka still had payments of nearly $21 billion lined up until the end of 2025.
It faces strong headwinds, with the central bank estimating a contraction in growth of 4 percent to 5 percent this year, with inflation to hit 60 percent by year-end, he said, though the government targets a smaller contraction of 1 percent in growth next year.
After reaching a staff-level agreement with the IMF, Sri Lanka aims to hold a donor conference with "friendly countries" such as China, India and Japan to secure more loans through a "common agreement," Wickremesinghe told lawmakers.
Last week, the IMF said talks with Sri Lanka had been "constructive", raising hopes it would soon grant preliminary approval for a desperately needed financial support package.
Analysts warn that rate hikes will have little impact in reducing galloping prices, however, since they are largely being driven by higher fuel costs.
Sri Lanka owes at least $3.5 billion to China and other countries and global investment funds that have also lent tens of billions to Colombo want assurances that any debt relief they provide will be matched by Beijing.