The International Monetary Fund has rejected a US$4 billion bailout for Sri Lanka and instead urged the country to restrict its intervention in foreign exchange markets.
Sri Lanka's finance minister Ravi Karunanayake travelled to Washington last month, where he sought “international goodwill” for the bailout, hoping to secure more than US$4 billion to finance the “restructuring” of debt.
However the proposal has been rejected by the IMF.
Todd Schneider, mission head of the IMF's post-aid program said "the situation today is quite different." "We only provide balance of payments support," Mr Schneider told reporters in Colombo.
He went on to add that Sri Lanka needed to limit its intervention in foreign exchange markets, stating the IMF had "highlighted the need for a cushion of foreign exchange reserves and in this context emphasised the need for exchange rate flexibility."
After Sri Lanka repaid a $500 million sovereign bond and other debts, foreign reserves fell by more than $1 billion in January alone, reports Reuters.