Sri Lanka needs institutional reforms in order to achieve long-term debt sustainability, said Steve Hanke, who played a key role in establishing new currency regimes in emerging markets like Argentina and Montenegro.

Sri Lanka is negotiating with India to extend a US$1 billon credit line by a few months, two sources told Reuters, as the island nation tries to line up funds for the rest of the year while the IMF looks set to approve a US$2.9 billion loan for it soon.

The Managing Director of the International Monetary Fund (IMF) has welcomed the progress made by the Sri Lankan authorities in taking decisive policy actions and obtaining financial assurances from all major creditors including China, India and the Paris Club.

The Central Bank said it was overserving a trend where large amounts of foreign currency, which had been stashed away, now being released, further increasing the supply of dollars to the market and thereby strengthening the rupee.

Sri Lanka’s central bank has raised interest rates to tackle inflation and said it would relax its currency band to move towards a market-determined exchange rate as it seeks to secure a bailout from the International Monetary Fund.

As the liquidity in the foreign exchange market is improving steadily, the Central Bank said it would fully lift the trading band introduced in last May along with the complete removal of the foreign currency sell-down rule imposed on exporters from next week onwards.

The International Monetary Fund (IMF) has defended the tax reforms which has drawn strong public opposition in Sri Lanka.

FAO, USAID, and the Ministry of Agriculture’s Department of Agriculture are developing a plan of action to increase the paddy productivity of the Dry and Intermediate Zones.

As the economic collapse and political instability have devastated the lives and livelihood of the people of Sri Lanka, the island nation is in dire need of a new development model, the World Bank (WB) said.