COLOMBO, April 20, 2022 (BSS/AFP) - The International Monetary Fund said
on Wednesday that it has asked cash-strapped Sri Lanka to "restructure" its
huge foreign debt before a bailout programme could be finalised as anti-
government protests escalated across the island.

   Sri Lanka opened talks with the IMF in Washington this week after
announcing its first ever default on external borrowings.

   The South Asia country is in the grip of its worst economic crisis since
independence in 1948 and has been rocked by a wave of protests over food and
fuel shortages.

   "When the IMF determines that a country's debt is not sustainable, the
country needs to take steps to restore debt sustainability prior to IMF
lending," the Fund's country director Masahiro Nozaki said in a statement.

   "Approval of an IMF-supported program for Sri Lanka would require adequate
assurances that debt sustainability will be restored."

   The IMF said talks with Sri Lanka were still at an "early stage," but it
was "very concerned" about the economic situation and the hardships suffered
by people, especially the poor and vulnerable.

   Earlier this year, the IMF warned Sri Lanka's approximately $51 billion
foreign debt was unsustainable.

   Colombo's existing debt also means the country cannot apply for emergency
financing, the IMF said.

   Sources in the country's finance ministry have made it clear that debt
restructuring will require creditors to accept a "haircut" -- a reduction in
the value of their assets -- or agree to longer repayment periods.

   Nearly two weeks ago, the government nearly doubled key interest rates and
allowed the currency to depreciate faster, hoping the move would encourage
foreign currency inflows.

   On Monday, President Gotabaya Rajapaksa conceded that Sri Lanka should
have gone to the IMF "much earlier".

   The country is short of dollars to finance even the important essentials,
including food, fuel and medicines. Widespread shortages have sparked
nationwide protests that turned violent on Tuesday.

   One man was shot dead and 29 others were wounded in clashes in a central
town, while tens of thousands continued demonstrations outside the
president's office in Colombo demanding his resignation.