IMF set to consider final approval of Sri Lanka’s USD 2.9 billion bailout package

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The IMF board is set to meet on March 20 for the possible approval of the USD 2.9 billion bailout for debt-ridden Sri Lanka, a statement said on Tuesday.

“Sri Lanka has now received financing assurances from all major bilateral creditors. This paves the way for consideration by the IMF’s board on March 20 for the approval of the Staff Level Agreement reached on September 1, 2022, for financing under an Extended Fund Facility.” The International Monetary Fund’s statement came after President Ranil Wickremesinghe’s remarks in the parliament that China had given its financing assurances and Sri Lanka had signed the letter of intent with the IMF for the bailout.

The IMF statement added that approval by the board would also catalyze financing from other creditors, including the World Bank and the Asian Development Bank.

“The arrangement will support the authorities’ programme of ambitious reforms, that they have already embarked upon, which will help Sri Lanka emerge from its current crisis and set it on a trajectory of strong and inclusive growth.” Wickremesinghe told parliament that all of IMF’s pre-conditions for the bail-out had been fulfilled and the reforms prescribed were a must for implementation.

His government had raised personal taxes, and utility bills, and cut subsidies as part of the reforms required.

Even as the IMF statement came, the trade unions in the cash-strapped country vowed to fight what they termed the unjust tax policy of the government.

They are going into trade union action from Wednesday, leading to a complete standstill of the island nation by March 15.

In January, India strongly backed the island nation’s efforts to secure a loan from the global lender to recover from its worst-ever economic crisis.

The IMF bailout process made slow progress due to the need to restructure Sri Lanka’s nearly 50 billion dollar external debt.

By the end of June 2022, Sri Lanka owed nearly USD 40 billion to bilateral, multilateral, and commercial loans, according to the figures released by the Treasury.

Chinese loans amounted to 20 per cent of the total debt owed and 43 per cent of the bilateral loans.

Sri Lanka in April declared its first-ever debt default in its history as the economic crisis since independence from Britain in 1948 triggered by forex shortages sparked public protests.

Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support.

Sri Lanka has introduced painful economic measures such as tax hikes and utility rate hikes. Trade unions and opposition groups have organised protests against such measures.