Sri Lanka awaits IMF approval for crucial bailout fund

Sri Lanka’s President Anura Kumara Dissanayake expressed optimism on Friday, anticipating that the International Monetary Fund (IMF) would announce a staff-level agreement on the third review of the country’s bailout programme.

Once the IMF’s executive board grants its approval, Sri Lanka is poised to receive an additional $337 million in much-needed funds.

Dissanayake’s newly elected National People’s Power (NPP) coalition, which secured a historic 159 seats in the recent general election, is now tasked with addressing the nation’s economic crisis.

An IMF delegation is currently in Colombo to conduct the third review of the $2.9 billion programme. A press briefing is scheduled for Saturday to provide further updates.

The government has outlined ambitious plans to complete a $12.5 billion debt restructuring with bondholders by December. Additionally, individual agreements with bilateral creditors, including Japan, China, and India, are essential to finalise the $10 billion debt restructuring.

President Dissanayake acknowledged the precarious state of the economy, emphasising the need for careful policy decisions to avoid further shocks. The government’s priority is to rebuild confidence and reassure stakeholders.

Sri Lanka’s 2022 economic crisis, triggered by a severe foreign currency shortage, led to a sovereign default and a significant economic contraction. Despite the challenges, the country is projected to achieve a 4.4 per cent growth rate in 2024, marking a positive turn after three years of decline.

The government now faces the dual challenge of implementing the IMF programme and fulfilling its election promises of tax reductions and increased welfare benefits.

Attribution: Reuters

Subediting: M. S. Salama