COLOMBO: Sri Lanka will seek an IMF stand-by arrangement to fend off a risk that its economy will be hurt next year by repercussions from events affecting major economies, Prime Minister Ranil Wickremesinghe told parliament on Tuesday.
Sri Lanka's foreign reserves have been dwindling as the central bank intervenes to defend the rupee.
"In the event of Middle East instability due to ISIS terrorist activities, Sri Lanka could face a problem worse than instability in the advanced economies," Wickremesinghe said in a debate on the 2016 budget.
"Considering these situations, we expect to negotiate with the IMF for a stand-by facility in advance. This is because we can't pass the burden to the people."
Sri Lanka depends on the United States and Europe for 50 percent of its exports worth $11.1 billion and on the Middle East for most foreign remittances, worth more than $7 billion.
Opposition parties said poor economic management was forcing the government to turn to the International Monetary Fund.
Central bank data shows foreign reserves fell to $6.48 billion by the end of October from around $9 billion a year earlier. It also showed a $4.75 billion payment due for the previous loan before Oct. 31, 2016.
A $1.5 billion sovereign bond sale boosted the reserves to $8 billion by Nov. 3, but they have fallen since as the central bank props up the rupee while holding down interest rates.
"This is a serious crisis ... When the government goes for a stand-by arrangement, the IMF will lay conditions," opposition law maker Dinesh Gunawardene told Parliament.
Sri Lanka borrowed $2.6 billion from the IMF through a stand-by facility from 2009 to 2011 to boost its reserves after a balance-of-payment crisis.
Todd Schneider, head of the IMF mission to Colombo, said in September Sri Lanka was not facing such a crisis now and there was no need for a stand-by arrangement.
Despite central bank the intervention, the rupee has dropped around 8.4 percent so far this year and 5.9 percent since the central bank allowed it to float on Sept. 4, Thomson Reuters data showed.
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