Sri Lanka is facing its worst financial crisis since independence in 1948, which has left it struggling to pay for essential imports and forced it to default on some foreign debt. Serhej Calka | Istock | Getty Images
CNBC  - June 30 2022

The International Monetary Fund has ended talks with Sri Lanka, failing to conclude a deal for a bailout package for the near-bankrupt nation after 10 days.

Nevertheless, in a statement released around noon Sri Lanka time on Thursday, the IMF promised to keep up the talks, which began on June 20. “The discussions will continue virtually with a view to reaching a staff-level agreement on the extended fund facility or EFF arrangement,” it said.

The EFF was established to assist countries with “serious payment imbalances,” according to the IMF. In addition, it provides support for policies “needed to correct structural imbalances over an extended period.”

Sri Lanka, an island nation of 22 million people, is facing its worst financial crisis since independence in 1948, which has left it struggling to pay for fuel and forced it to default on some foreign debt.

Left with just enough fuel for about a week and fresh shipments at least two weeks away, Sri Lanka has imposed restrictions on supplies, limiting them for use for public services like trains and buses and those relating to the health sector, Reuters reported. The ban is scheduled to last two weeks.

Noting that public debt is assessed as unsustainable, the IMF said executive board approval of a package would require “adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored.”

“In this context, discussions focused on designing a comprehensive economic program to correct the macroeconomic imbalances, restore public debt sustainability, and realize Sri Lanka’s growth potential,” the press release said.

‘Fragile state’

The lack of a bailout package defied the expectations of an expert CNBC spoke to earlier in the day.

Georgetown University professor Shanta Devarajan said Sri Lanka was close to reaching an agreement with the IMF.