Crisis-hit Sri Lanka eyes $7bn more after $3bn IMF bailout
Colombo, Mar 21 (EFE).- After securing a $3 billion bailout from the International Monetary Fund (IMF), the Sri Lankan government is now eying $7 billion more from other financial institutions to help the struggling economy.
The global lender approved on Monday the much-awaited package to help the island come out of its worst economic crisis since independence.
The country would “immediately” receive an initial disbursement of around $330 million, based on an “ambitious” fiscal consolidation, restoration of public debt sustainability, and other structural reforms.
The IMF officials said Colombo’s current public debt was unsustainable at 128 percent of the GDP at the end of 2022.
It justified the delay in approving the bailout as it needed to obtain guarantees from official bilateral creditors.
President Ranil Wickremesinghe said the island nation had never faced “a more critical period for our economic future” in the 75 years of Sri Lanka’s independence.
The president said the bailout would enable “Sri Lanka to access up to $7b in funding from IMF & IFIs (International Financial. Institutions).”
“The IMF program will be imperative to improving Sri Lanka’s standing in and access to international capital markets, and it will demonstrate that Sri Lanka is once again a country attractive to talent, investors and tourists.”
Wickremesinghe said Sri Lanka was no longer considered bankrupt by the world.
He said the IMF loan facility would assure that the country “has the capacity to restructure its debt and resume normal transactions.”
He said the government-imposed restrictions on the import of essential goods, medicines, and tourism-related goods would be revoked gradually.
The government had restricted imports because of depleting foreign currency reserves.
Sri Lanka requested IMF assistance in March last year to tackle the financial crisis.
The two sides finally agreed on an initial and urgent bailout in September last year.
The crisis that engulfed the island since last year has been attributed to misguided fiscal policies and sky-high debt, apart from a sharp drop in foreign currency inflow during the Covid-19 pandemic.
Sri Lanka has an annual debt load of around $6 billion for the next five years, around 10 times higher than its current foreign currency reserves.
Wickremesinghe’s government took drastic measures to unlock the IMF bailout, resulting in mass protests in Colombo against new tax reforms and hiked electricity tariffs.
“It is important to be conscious and vigilant about the negative implications on the human rights of an IMF loan. We also need to be conscious of past failures of the IMF in Sri Lanka and other countries such as in Greece,” human rights activist Ruki Fernando told EFE.
The IMF said the impact of the planned reforms on the vulnerable sections of the population should be “mitigated with adequate measures.”
“There have been incredible increases in the cost of living, there’s been loss of employment, loss of livelihoods, rising energy costs and falling real incomes that really have hit the population,” Breuer acknowledged.