German companies operating in Sri Lanka have raised the red flag with some warning that they will be compelled to withdraw from the country if the import ban continues, Daily Mirror has reported.

The report further states:

Sri Lanka has slapped an import ban on several items owing to the shortage of US dollars, but Germany has urged the Government to relax the ban.

The German Ambassador to Sri Lanka Holger Seubert told a group of journalists in Colombo today that some German companies have raised concerns over the import ban.

He said that if the import ban continues for another 2 years then some companies may withdraw from the country. A number of German companies are operating in Sri Lanka and promote German products, including vehicle spare parts.

Just recently leading Japanese companies Mitsubishi and Taisei announced they will be scaling back operations in Sri Lanka owing to the economic crisis. Germany has also suspended issuing loans to Sri Lanka after the island declared bankruptcy.

However, the German Ambassador said that they hope the situation will improve once Sri Lanka’s deal with the International Monetary Fund (IMF) gets approved. Seubert said that there are also concerns over the overall business environment for German investors.

Discussions in this regard have been held with the Sri Lankan authorities, including the Board of Investment (BOI).

The International Monetary Fund (IMF) is considering approving a loan for Sri Lanka, even without China’s assurance of debt-restructuring support, Bloomberg News reported on Friday.

Read Bloomberg full report

The International Monetary Fund is considering approving Sri Lanka’s bailout even without the formal assurance of debt-restructuring support from China, the nation’s biggest bilateral creditor, according to people familiar with the discussions.

Under a rarely used policy on lending into official arrears, the IMF may consider approving Sri Lanka’s loan because China’s assurance is the only prerequisite missing, according to the people who declined to be identified because the information isn’t public.

This provision is aimed at preventing a creditor from blocking assistance to a country in dire need of financing and has shown commitment to meet loan conditions.

An IMF spokesperson said that it’s premature to discuss the precise IMF policies that could be applied to lending to Sri Lanka, and that the nation’s authorities continue to seek financing assurances so that the fund’s executive board can consider their request for a loan. IMF staff also continue to engage with the Sri Lankan authorities who are working on completing upfront policy measures, the spokesperson said.

IMF Policy

The IMF can use the policy on lending into official arrears if it deems prompt financial support is essential and sees the country pursuing appropriate policies and making good-faith efforts to reach an agreement with creditors, according to an explanation on the fund’s website.

Moving forward with loan approval would be a shift from its position earlier this month, when it said the approval of Sri Lanka’s $2.9 billion Extended Fund Facility will depend on whether the nation can secure assurances from all bilateral creditors.

The development comes as World Bank President David Malpass said Thursday that long extensions of debt are among the options that G-20 nations and others are considering to help ease the burden for poor countries.

The IMF, World Bank and Group of 20 nations chair India separately held virtual discussions Friday on global sovereign debt ahead of the finance ministers and central bank governors’ meeting in Bangalore next week.

Sri Lanka and Pakistan count on IMF loans to provide immediate relief by shoring up their foreign-currency reserves and unlocking more funding.

Pending China’s creditor assurance, Sri Lanka is trying to meet other reform conditions set by the IMF, including increasing electricity tariffs and clearing a new monetary law for parliament approval. The government may also loosen its grip on a currency band to meet the fund’s requirements.

The Paris Club — an informal group of rich, mostly western creditors — and India have provided formal support to Sri Lanka’s loan recast, leaving China as a holdout.

China, which accounts for about 52% of the bankrupt nation’s bilateral debt, has instead offered term extensions via the state-owned Export-Import Bank.

Debt negotiations have dragged since Sri Lanka defaulted in May, causing severe supply shortage, depleting its foreign-currency reserves, sending inflation and borrowing costs soaring and pushing the economy into a recession.

While the nation has repurposed some funds to ease the shortage and damp price pressures, it would need IMF’s bailout and other funding to turn the situation around.

By  Ruchi Bhatia and Eric Martin
— With assistance by Anusha Ondaatjie and Asantha Sirimanne

The party’s working committee approved yesterday (17) to prepare a new constitution for the United National Party.

It was at the working committee meeting held yesterday (17) at the Sirikota party headquarters under the chairmanship of UNP leader and President Mr. Ranil Wickramasinghe.

A committee consisting of presidential lawyers has also been appointed to amend the party constitution.

Former ministers Thilak Marapana, Daya Palpola, Ronald Perera, and Nishanka Nanayakkara have been named to the said committee.