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Sri Lanka's prime minister is now in charge of the key finance ministry. Uditha Jayasinghe's contribution

Images: Reuters Berita 24 English - The president's office stated on Wednesday that Sri Lankan Prime Minister Ranil Wickremesinghe will ...

Images: Reuters

Berita 24 English - The president's office stated on Wednesday that Sri Lankan Prime Minister Ranil Wickremesinghe will assume dual charge as finance minister and will oversee talks with the International Monetary Fund (IMF) as the country seeks a bailout.

President Gotabaya Rajapaksa swore in Prime Minister Ranil Wickremesinghe as finance, economic stabilization, and national policies minister this morning, according to a statement from the president's office.

Wickremesinghe spelled out his immediate economic goals in an interview with Reuters on Tuesday, including proposing an interim budget within six weeks that will slash government spending "to the bone" and re-route cash into a two-year relief program.

Sri Lanka, a 22-million-strong island nation, is experiencing its greatest economic crisis since its 1948 independence, with a chronic lack of foreign money severely restricting imports, including necessities like fuel and medication.

The COVID-19 outbreak, which has decimated the country's valuable tourism economy and remittances from foreign workers, has been compounded by Rajapaksa's ill-timed tax cuts, which have depleted government resources, and rising oil prices.

The World Bank announced on Tuesday that it will not offer any fresh credit to Sri Lanka until an effective economic policy framework is in place.

The new budget "will spell out a roadmap for multilateral institutions and other lenders to track public financial targets and perhaps extend support to Sri Lanka," Trade Minister Ramesh Pathirana told Reuters.

Wickremesinghe stated in the interview that he aimed for a "sustainable credit package" from the IMF while implementing structural changes to attract fresh investment.

On Tuesday, first talks with the IMF came to an end. IMF Managing Director Kristalina Georgieva said earlier this week that the lender was "working relentlessly" on Sri Lanka on a technical level.

Rating agencies have also put Sri Lanka in default due to the non-payment of coupons on two of its sovereign bonds. It has hired Lazard and Clifford Chance as financial and legal counsel as it prepares for the onerous task of renegotiating its $12 billion in offshore debt.

Wickremesinghe, 73, is a seasoned politician who has served as Prime Minister five times previously.

The economic liberal has previous IMF experience, as Sri Lanka had an IMF program in 2016 during one of his prime ministerships.

He has also developed contacts with regional heavyweights India and China, as well as significant investors and lenders, all of whom are competing for influence in Sri Lanka, which is located along busy trade routes connecting Asia and Europe.

The difficulty is that whatever economic reforms Wickremesinghe implements to meet IMF requirements could result in short-term hardship and unrest on the streets. Increases in gasoline and diesel prices announced on Tuesday would almost certainly affect transportation and food costs.

According to Wickremesinghe, annual inflation is now at 33.8 percent and could reach 40 percent.

Wickremesinghe's retention of the finance portfolio was widely expected, according to Udeeshan Jonas, chief strategist for market research firm Capital Alliance. However, Jonas added: "Whether with or without assistance, unpleasant decisions will have to be made. He doesn't have a choice."

Since late March, demonstrators have been raging in Sri Lanka, accusing the president and his wealthy family of mismanaging the economy.

After skirmishes between government supporters and demonstrators in Colombo prompted conflicts across the country, violence erupted two weeks ago, leaving nine people dead and about 300 injured. Following the violence, President Rajapaksa's elder brother, Mahinda Rajapaksa, resigned as Prime Minister.

President Rajapaksa and Prime Minister Wickremesinghe have subsequently attempted to assemble a new cabinet of ministers, bringing together members of the ruling party as well as some opposition organizations.

According to government and ruling party insiders, the important finance minister role has remained empty so far, with some prospective candidates declining the job.

Ali Sabry, the previous finance minister who had begun talks with the IMF in April, resigned in early May after Prime Minister Rajapaksa resigned.

"The finance minister's appointment is critical because he needs to get the ball moving on a new budget, negotiations with the IMF, and spearhead fiscal support," said Lakshini Fernando, a macro-economist with Asia Securities in Sri Lanka.

"Ranil Wickremesinghe is the best alternative, but we'll have to see if he can command a majority in parliament and serve as prime minister and finance minister at the same time."

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