World Bank offers prop for Sri Lanka’s stressed banks

COLOMBO, SRI LANKA — The World Bank on Friday provided Sri Lanka US$150 million to underwrite savings of millions of depositors in a move that highlights the bankrupt country’s financial fragility as it recovers from a crisis last year.

The country’s rupee currency plunged almost 50 percent last year after the government declared bankruptcy and defaulted on its US$46 billion foreign debt.

Acute shortages of food, fuel and medicines led to months of violent protests that forced then-president Gotabaya Rajapaksa to step down and flee the country.

“Sri Lanka’s economic crisis highlights the need for strong safety nets to support the financial sector,” the World Bank’s country director Faris Hadad-Zervos said.

The money will go towards a deposit insurance scheme to protect small savers with less than 1.1 million rupees (US$3,400), who account for 90 percent of deposits.

The economy is expected to contract in 2023 but it has stabilised since the crisis, with inflation falling below two percent after peaking at nearly 70 percent more than a year ago.

Colombo secured a 48-month US$2.9 billion bailout from the International Monetary Fund in March, but the latest installment of US$330 million has been held up since September as foreign debt restructuring remains inconclusive.

— AFP