Sri Lanka's central bank chief said Thursday he hopes the government can reach a preliminary agreement that could lead to a bailout package with the International Monetary Fund when its officials visit the crisis-hit island nation later this month. The Indian Ocean country is effectively bankrupt and its economic crisis set off massive public protests that led to the ouster of President Gotabaya Rajapaksa last month. The government has said the crisis has made the negotiations with the IMF difficult. Nandalal Weerasinghe, the governor of Sri Lanka's central bank, said he hoped IMF officials and Sri Lanka's government could “finalize and reach a staff-level agreement" on the policy package during their meetings. Sri Lanka announced in April that it is suspending repayment of foreign loans. Its total foreign debt is $51 billion, of which it must pay $28 billion by 2027. The country has said it needs to restructure all of its debt. Weerasinghe told reporters Thursday that the agreement being sought with the IMF would give them “a clear picture on debt sustainability and debt targets for us to achieve in the next 10 years.” Once an agreement is reached, Weerasinghe said, Sri Lanka would approach sovereign bond holders and other external creditors. "We hope all our creditors will support Sri Lanka once they see the strong macro program endorsed by the IMF," he said. Sri Lanka’s new President Ranil Wickremesinghe said two weeks ago that his government had initiated negotiations with the IMF on a four-year rescue plan and had commenced the finalization of a debt restructuring plan. However, Wickremesinghe also said negotiations with the IMF have been difficult because of Sri Lanka’s bankruptcy and that an expected early August target for an agreement with the agency was not possible. It is now expected in September. Read: Sri Lanka leader proposes 25-year plan for crisis-hit nation Wickremesinghe was elected last month to complete the rest of Rajapaksa’s five-year term, which ends in 2024. Rajapaksa resigned in exile and is now in Thailand. The protesters blamed Rajapakasa and his powerful family for years of mismanagement and corruption that have bankrupted the nation and led to unprecedented shortages of essential imports like fuel, medicine and cooking gas. Wickremesinghe’s government is preparing a national policy roadmap for the next 25 years that aims to cut public debt and turn the country into a competitive export economy. Wickremesinghe has stressed that Sri Lanka needs long-term solutions and a strong foundation to stop a recurrence of economic crises. Two weeks ago, he said the hardships had eased somewhat with reduced power cuts, fertilizers being brought in for cultivation and cooking gas distribution improving. But many people complain that price hikes of most essential items are unbearable. Prices of most essentials have tripled in recent months and most people are struggling to pay for basic needs. About 70% of Sri Lankan households surveyed by UNICEF in May reported cutting back on food consumption. Many families rely on government rice handouts and charitable donations. Separately Thursday, police fired tear gas and used water canons to disperse university students who were walking in a protest march in the capital Colombo, demanding that Wickremesinghe resign. Local television channels showed police arresting some of the protesters. Protestors accused Wickremesinghe of being a surrogate of Rajapaksa and trying to suppress the rights of the people to protest. They paraded along the main roads in the Colombo, shouting slogans and displaying banners that read “Go Ranil Go, get lost with ALL Rajapaksas,” “Stop Suppression and “Release all the arrested protestors.” Since his election, Wickremesinghe has authorized the military and police to violently dismantle protest camps in Colombo and arrest those they identified to have trespassed in the president’s official residence and other state buildings. Rights groups have accused Sri Lanka’s government of using emergency laws to harass and arbitrarily detain protesters who are seeking political reform and accountability. However, Wickremesinghe has said that although the protests started peacefully, groups with political interests took over later and became violent, citing the burning of dozens of ruling party politicians’ homes in May.

Sri Lanka’s Central Bank has raised its key interest rates to their highest levels in more than 20 years to try to contain inflation that has added to the country’s economic woes. Recent price hikes have been a severe blow, especially for the South Asian country’s poor and vulnerable groups as they endure their country’s worst economic crisis in memory, struggling with acute shortages of essentials such as food, fuel, cooking gas and medicines. Two weeks ago, Prime Minister Ranil Wickremesinghe told lawmakers the economy had “collapsed." On Wednesday, he announced he had called Russian leader Vladimir Putin to request credit support to help the country import fuel. Also read: Sri Lanka PM says talks with IMF difficult due to bankruptcy The central bank said it had raised its Standing Deposit Facility Rate by 100 basis points to 14.50%. The move is expected to help draw more funds into the banking sector. It also raised the Standing Lending Facility Rate that it charges commercial banks by 100 basis points, to 15.50%. Those rates were last that high in 2001. The bank said it expects to tighten its monetary policy further to fully curb inflation, which rose to nearly 55% in June, while food inflation topped 80%. The bank raised its policy rates by 700 basis points each in April, roughly doubling them and surprising economists as it struggled to drive inflation lower. Earlier, Fitch Solutions Country Risk & Industry Research forecast that it would push the Standing Deposit Facility Rate to 16.50% and the Standing Lending Facility Rate to 17.50% by the year’s end. “Our priority is to bring down inflation to at least a reasonable level as soon as possible. The sooner the better,” said the central bank governor, Nandalal Weerasinghe. Many central banks, most notably the U.S. Federal Reserve, have been raising interest rates to prevent inflation from spiraling out of control. But Sri Lanka faces troubles on a different scale. Also read: With no fuel and no cash, Sri Lanka keeps schools closed “What the central bank has done is a measure in the right direction, but it's too short given the high inflation rate of 55 per cent right now which will accelerate to more than 80 to 100 per cent in the next two to three months,” said W.A. Wijewardena, an economist and former deputy governor of Sri Lanka's Central Bank. Prices of most essentials have tripled in recent months and the most people are struggling to pay for their basic needs. About 70% of Sri Lankan households surveyed by UNICEF in May reported cutting back on food consumption. Many families rely on government rice handouts and charitable donations. The central bank said Sri Lanka’s economy is estimated to have contracted 1.6% from a year earlier in the first quarter of the year. Shortages of fuel and electricity have further crimped economic activity in April-June. Even though the economy already has slowed, the interest rate hikes would help temper expectations for further price increases, helping bring inflation down to a target of 6%-7%, the central bank said in a statement. Due to the acute fuel and power shortages, Sri Lanka has kept schools shut for weeks, while the government has asked state employees other than those in essential services to work from home. This week, daily three-hour power cuts went into effect. Strapped by dwindling foreign reserves, Sri Lanka has suspended repayment on foreign debts worth about $7 billion that were due this year. The country is negotiating with the International Monetary Fund on a bailout package, but Wickremesinghe, the prime minister, said this week that negotiations were proving complex and difficult because Sri Lanka is effectively bankrupt. The economic meltdown has triggered a political crisis, with widespread anti-government protests erupting across the country. Protesters have blocked main roads to demand gas and fuel, and television stations showed people in some areas fighting over limited stocks. In the capital, Colombo, protesters have been occupying the entrance to the president’s office for more than two months to demand President Gotabaya Rajapaksa’s resignation. They accuse him and his powerful family, which includes several siblings who until recently held top government positions, of precipitating the crisis through corruption and misrule.