Crisis-hit Sri Lanka will offer a plan to restructure its debt to the International Monetary Fund (IMF) by August to secure permission for a four-year funding package, according to the country's prime minister.

Because the country is bankrupt, conversations with the IMF are more complex and harder than in the past, Prime Minister Ranil Wickremesinghe said on Tuesday.

"We are now participating in the negotiations as a bankrupt country," he said, referring to the talks with the international lender. Therefore, we must deal with a more tough and complex scenario than in prior conversations.

Following a recent visit by a mission from the IMF, Prime Minister Wickremesinghe announced in parliament a plan for the island nation to emerge from its economic crisis.

Due to a severe dollar shortage caused by economic mismanagement and the aftermath of Covid-19, the cash-strapped nation of 22 million people cannot pay for food, fertilizer, pharmaceuticals, and fuel imports.

As a result of the country's inability to pay for additional gasoline supplies, the government has extended the school closure, instructed government employees to work from home, and restricted fuel distribution to critical services.

As the nation on the Indian Ocean battles its worst economic crisis in decades, inflation hit 54.6% in June. The central bank is anticipated to boost interest rates following Thursday's policy announcement to curb prices.

'constructive' talks

Despite the postponement of repayments on over $12 billion of foreign debt in April, Wickremesinghe stated that Sri Lanka still had nearly $21 billion in scheduled payments through the end of 2025.

It confronts substantial headwinds, with the central bank predicting a contraction in GDP of 4 to 5 percent this year and inflation reaching 60 percent by the end of the year, he added, although the government aims for a lesser contraction of 1 percent in growth next year.

Wickremesinghe informed MPs that after obtaining a staff-level agreement with the IMF, Sri Lanka intends to organize a donor conference with "friendly countries" such as China, India, and Japan to get more loans through a "common agreement,"

The IMF stated last week that discussions with Sri Lanka were "constructive," bolstering hopes that it will soon award preliminary approval for a much-needed financial rescue package.

Analysts caution that rate increases will not affect soaring prices, driven mainly by rising gasoline costs.

Sri Lanka owes at least $3.5 billion to China, and other nations and global investment funds that have borrowed tens of billions of dollars from Colombo want assurances that Beijing will match the debt relief they provide.