World Bank's IFC to offer Sri Lanka with $400 million financing
The International Financial Corporation (IFC), the World Bank's investment arm, announced a $400 million cross-currency exchange facility for Sri Lanka to help pay necessary imports.
Three private banks that handle more than 30% of Sri Lanka's remittances and exports will receive the facility to cover necessary imports such as medicine, food, and fertiliser,According to sources.
The money will provide a much-needed foreign exchange cushion for Sri Lanka, which is experiencing its worst financial crisis in over seven decades, which has been exacerbated by a severe dollar shortage.
As per World Bank data, the island nation's GDP shrank by 9.2 percent in 2022 and is forecast to contract by another 4.2 percent in 2023.
"We expect this financing to boost confidence in the investor community, attract fresh capital inflows to support the Sri Lankan economy," said Joon Young Park, IFC's Portfolio Manager, Financial Institutions Group for South Asia.
The IFC is also working on future plans to provide client banks with more long-term finance and consulting services, according to the statement.
Sri Lanka inked a preliminary deal with the International Monetary Fund (IMF) in September for a $2.9 billion bailout, but before the funds can be paid, it must put its debt on a sustainable repayment track.