Sri Lanka is going through the worst economic crisis since its independence from Britain in 1948, and needs to obtain at least USD 4 billion to tide over the acute shortage in foreign exchange reserves.

An International Monetary Fund (IMF) team visited Colombo on June 20 to continue discussions on an economic programme that could be supported by an IMF lending arrangement.

The IMF later said it has concluded “constructive and productive” discussions with Sri Lankan authorities, but warned that the crisis-ridden island nation needs to do more on debt restructuring and step up structural reforms to address corruption vulnerabilities before a bailout package is finalised.

"The first round of discussions with the IMF has been a success but the assistance depends on the debt restructuring programme which Sri Lanka has to come up with," Wickremesinghe said in Parliament.

Sri Lanka is currently working on the debt restructuring sustainability being prepared by legal and financial experts. "We hope to submit this report to the IMF by August. Once this is done we will be able to reach an agreement," he said.

The anticipated IMF facility is viewed as being slow to materialise due to the question of the island’s debt sustainability.

Wickremesinghe said the economic crisis will be resolved through meaningful reforms and stressed that the support of Parliament, including the Opposition, is of paramount importance.

"A return to an open economy, devoid of state monopolies, is a must. Economic integration with the region mustn’t be feared, but pursued,” he said.

Wickremesinghe recalled that Sri Lanka held negotiations with the IMF on many occasions before, however at those times discussions were held as a developing country.

"But this time the situation is different from all those previous occasions. We are now participating in the negotiations as a bankrupt country. Therefore, we have to face a more difficult and complicated situation than in previous negotiations," he said.

"Once a staff-level agreement is reached, this will be submitted to the IMF Board of Directors for approval. But due to the state of bankruptcy our country is in, we have to submit a plan on our debt sustainability to them separately.

"Only when they are satisfied with that plan can we reach an agreement at the staff level. This is not a straightforward process. We have been able to end the round of discussion effectively despite these difficulties," Wickremesinghe said.

He said Sri Lanka's economy is currently shrinking and the government was trying to reverse it.

"According to central bank statistics, our current economic growth rate is between negative four and negative five. According to IMF statistics, it is between negative six and negative seven. This is a serious situation," he said.

"By 2025, our aim is to create a surplus in the primary budget. Our effort is to raise the economic growth rate to a stable level. Our expectation is to establish a stable economic base by 2026," he said.

"It will take till 2026 to go back to the 2018 level. If we make a determined journey along this road map, we can achieve an economic growth rate of negative one by the end of 2023, he said.

He said the total debt burden of the government at the end of 2021 was Rs 17.5 trillion and by March 2022 it has increased to Rs 21.6 trillion.

The Prime Minister also presented the roadmap with proposed solutions to the existing economic problem. He said it was important to stabilise the rupee as soon as possible and strengthen the rupee without letting it fall.

"We have implemented a plan to limit the printing of money in the future. In 2023, we will have to print money with restrictions on several occasions. But by the end of 2024, it is our intention to stop printing money completely."

Wickremesinghe said that Sri Lanka’s inflation by the year end would be over 50 per cent. "Our plan is to control inflation. By the end of this year, inflation will rise to 60%. This is mainly due to the increase in the prices of goods in the world and the fall in the value of the rupee," he said.

He said the government aims to reduce the inflation rate to between 4 and 6 per cent by 2025.

The inflation in the month of June as measured by the Colombo Consumer Price Index (CCPI) was 54.6 per cent up from 39 per cent in May, it was announced last week.

"Another top priority for us is to protect the banking and financial system, he said.

"We will have to restructure the Electricity Board, Ceylon Petroleum Corporation and Srilankan Airlines,” he said.

Tuesday's Parliament session had to be suspended for ten minutes due to a tense situation which erupted in Parliament when Opposition MPs started shouting slogans against President Gotabaya Rajapaksa and displayed posters "Gota Go home" when Wickremesinghe was making a statement on the progress of the IMF talks.

President Rajapaksa, who was present in the House to attend sessions, left the chamber after the session was suspended.

The country, with an acute foreign currency crisis that resulted in foreign debt default, had announced in April that it is suspending nearly USD 7 billion foreign debt repayment due for this year out of about USD 25 billion due through 2026.

Sri Lanka's total foreign debt stands at USD 51 billion.

(With PTI inputs)