Conflicts & War

Sri Lanka secures $3 billion bailout package from IMF

Colombo, Mar 21 (EFE).- The International Monetary Fund has approved a much-awaited bailout package worth $3 billion for Sri Lanka, officials of the international body confirmed on Tuesday, announcing aid that was termed “critical” by the Sri Lankan government to tackle the severe economic crisis affecting the country.

“Today, the IMF Executive Board approved a 48-month extended arrangement under the Extended Fund Facility (EFF) of about US$3 billion to support Sri Lanka’s economic policies and reforms,” IMF’s mission chiefs for Sri Lanka Peter Breuer and Masahiro Nozaki said in a press briefing.

Under the agreement, Sri Lanka 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 that Colombo’s current public debt was unsustainable at 128 percent of the GDP at the end of 2022, and justified the delay in approving the bailout citing the need to obtain guarantees from official bilateral creditors.

The IMF said that the impact of the planned reforms over 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.

The bailout was welcomed by Sri Lankan President Ranil Wickremesinghe, who tweeted that the government was “committed to full transparency in our efforts to achieve sustainable levels of debt and our reform agenda.”

The island has witnessed a series of massive protests against the handling of the crisis by authorities, triggering the ouster of former president Gotabaya Rajapaksa last year, and the conditions of the bailout have also elicited criticism on the streets.

“The IMF is not coming to aid Sri Lanka because it loves the country. It is suggesting selling the state-owned property even those that are profit making. We are in a grave situation now,” the general secretary of the Ceylon Teachers’ Union, Joseph Stalin, told EFE.

However, political analyst Aruna Kulatunga told EFE that the IMF’s conditions were essentials for a country which had a very low GDP-to-revenue ratio and had been affected by deep-rooted corruption.

“Some of these conditions, which are already being implemented, include cost- reflective energy pricing” – much-needed after years of government subsidies – he told EFE, highlighting that the two state-owned companies managing electricity and oil distribution had sunk over the years with unpaid bills.

Sri Lanka sought IMF assistance in March 2022 to fight its worst economic crisis since independence from the British in 1948.

The crisis that has 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. EFE


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