IMF approves Sri Lanka’s $2.9bn bailout

“I specific my gratitude to the IMF and our worldwide companions for his or her help as we glance to get the economic system again on monitor for the long run by prudent fiscal administration and our bold reform agenda,” President Ranil Wickremesinghe mentioned in a press release.

Sri Lanka defaulted on its overseas debt in April 2022 because the nation plunged into its worst financial downturn since independence due to a serious scarcity of overseas foreign money reserves.

The Indian Ocean nation of round 22 million individuals ran out of money to finance even probably the most important imports, inflicting huge social unrest.

Widespread protests over financial mismanagement, acute shortages of meals, gasoline and medicines, and runaway inflation compelled president Gotabaya Rajapaksa to flee the nation and resign in July.

Rajapaksa was changed by Wickremesinghe as president who has carried out powerful spending cuts and tax hikes in an try to safe the IMF help.

There was a protracted delay to the IMF approving the package deal as a result of it took time to safe monetary assurances from China, Sri Lanka’s largest bilateral lender.

Beijing had mentioned this 12 months it was providing a two-year moratorium on its loans to Sri Lanka, however the concession fell wanting IMF expectations for the sustainability of the island’s debt.

Wickremesinghe had mentioned after China agreed to restructure its loans that he anticipated the primary tranche of the $2.9 billion IMF package deal can be made out there throughout the month.

Earlier Monday, Wickremesinghe’s workplace mentioned he was looking for a 10-year moratorium on Sri Lanka’s overseas debt because the nation was out of overseas reserves to service its loans.

Officers concerned within the negotiations mentioned the phrases of debt restructuring have to be finalised and agreed by all events earlier than June, when the IMF was anticipated to assessment the bailout programme.

“Sri Lanka will be unable to attract down the second tranche except a debt restructuring plan is agreed with all collectors,” mentioned one of many officers, who requested to not be recognized.

Colombo can also be banking on the IMF deal to unfreeze billions of {dollars} in overseas help for tasks suspended since Sri Lanka defaulted on its loans final 12 months.

The federal government has already doubled taxes, elevated power tariffs threefold and slashed subsidies in an effort to fulfill the preconditions of the IMF bailout.

The austerity measures have additionally led to strikes that crippled the well being and logistics sectors final week. Wickremesinghe has mentioned he had no various however to go together with an IMF programme.

Sri Lanka’s economic system shrank by a report 7.8 % final 12 months because it grappled with its worst overseas trade disaster since independence from Britain in 1948.