According to CBCIE.COM, International Finance Corporation (IFC), the investment arm of the World Bank, will provide a $400 million USD cross-currency swap to crisis-stricken Sri Lanka to help fund essential imports such as fertilizer, which are mostly traded in U.S. dollars.
IFC said on Feb. 27, they will provide the loan to Sri Lanka's Commercial Bank of Ceylon, National Trust Bank and Sampath Bank. The three private banks account for 30% of Sri Lanka's remittances and exports, the global entity said. The cross-currency swap arrangement will allow them to pay their dollar-denominated debt and support the banks in financing their clients' exports.
Sri Lanka has been dealing with the worst foreign exchange crisis since independence in 1948, leading to shortages of fuel, food and electricity and sparking protests.
The country imports mainly DAP, MOP, NPK and urea. GTT data show that the total amount of these fertilizers imported in 2022, when the crisis worsens, is about 297,000 tons, down 37% from about 469,000 tons in 2019, when the crisis first began. The company recently completed a tender for the purchase of 25,000 tons of bagged granulated urea to be delivered to the port of Colombo by April 20, although the result remains unclear.
The IFC financing will also help finance other essential imports such as food and medicine.
Joon Young Park, portfolio manager of IFC's South Asia Financial Institutions Group, said on Feb. 27, "The Sri Lankan economy continues to be severely constrained by dollar financing."
The foreign exchange crisis has also affected Sri Lanka's ability to pay for crude oil and fuel imports. The government is currently seeking interest in establishing an export-oriented refinery and petroleum products processing plant in the country's Hambantota region, perhaps to generate foreign exchange.
Last September, the IMF also approved a $2.9 billion loan to the island nation. In return, the IMF called on Sri Lanka to increase its foreign exchange reserves by shifting back to a market-determined exchange rate, among other measures.
The country's gross domestic product fell 9.2% in 2022 and is expected to fall a further 4.2% this year, according to the World Bank.
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