The World Bank has declared it will not offer new financing to Sri Lanka until an adequate macroeconomic policy framework is in place. It says Sri Lanka needs structural reforms focusing on economic stabilisation and tackling the root causes of its crisis. The crisis has starved the country of foreign exchange and led to shortages of food, fuel, and medicines. The Bank is repurposing existing loans to help with essentials.
Based only on this passage, which statement can be inferred with certainty?
Show Hint
- According to the World Bank, the root cause of Sri Lanka's crisis is lack of foreign exchange.
- The World Bank has stated it will advise Sri Lanka about how to tackle the root causes.
- According to the World Bank, Sri Lanka does not yet have an adequate macroeconomic policy framework.
- The World Bank has stated it will provide Sri Lanka with \emph{additional} funds for essentials.
The Correct Option is C
Solution and Explanation
Step 1: Translate key claims from the passage.
(i) "No new financing until an adequate macroeconomic policy framework is in place."
(ii) "Sri Lanka needed structural reforms … to tackle the root causes." (Present need $\Rightarrow$ current inadequacy.)
(iii) "Repurposing resources under existing loans" (not new money).
(iv) "The crisis has starved it of foreign exchange …" (listed as a consequence).
Step 2: Test each option against (i)–(iv).
(A) Root cause = lack of foreign exchange?
The passage lists lack of FX as an outcome of the crisis, not the root cause. The Bank calls for reforms to address "root causes" but never names FX scarcity as the cause. $\Rightarrow$ Not certain.
[4pt]
(B) The Bank will advise the government?
Nothing says it will advise/consult; it only demands/urges reforms and withholds new financing. "Will advise" adds intent not stated. $\Rightarrow$ Not certain.
[4pt]
(C) Framework not yet adequate?
From (i), financing is conditional on adequacy. Since the Bank is not offering new financing now and simultaneously says Sri Lanka needs reforms (ii), the necessary condition (adequate framework) is not yet met. $\Rightarrow$ Certain.
[4pt]
(D) Additional funds for essentials?
The Bank is repurposing existing loans, not adding new funds. "Additional" is contradicted by (iii). $\Rightarrow$ False.
Common traps explained.
- Confusing effects (FX shortage) with causes.
- Reading policy advice/assistance where only conditionality is stated.
- Equating "repurposing existing funds" with "giving additional/new funds."
Final Answer:
\[
\boxed{\text{(C)}}
\]
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