The President of Sri Lanka announced on Monday that the International Monetary Fund (IMF) had approved his $2.9 billion bailout request for the South Asian country’s collapsing economy.
The international institution confirmed that it had authorized the loan, but its managing director Kristalina Georgieva warned that the country must continue with its fiscal reform, improve the social protection network for the poor classes and control corruption.
“I express my gratitude to the IMF and our international partners for their support as we seek to turn the economy around in the long term through prudent fiscal management and our ambitious reform agenda,” Sri Lankan President Ranil Wickremesinghe said in a statement.
Sri Lanka declared bankruptcy on its foreign debt in April 2022, when the country was plunged into its worst economic crisis due to a shortage of foreign currency reserves.
The island nation of 22 million people could not finance even the most essential imports such as food, fuel or medicine, sparking fierce protests and forcing former President Gotabaya Rajapaksa to resign and leave the country last July.
He was replaced by Wickremesinghe who, since then, has implemented a policy of budget cuts and tax increases to guarantee this four-year aid program from the IMF.
Senior officials involved in this matter said that the negotiation to restructure the country’s debt must be finalized and accepted by all parties before June or, otherwise, Sri Lanka will not receive the second tranche of the bailout.
Sri Lanka requested IMF assistance in March last year to fight the worst financial crisis it has faced since its independence from the British Empire in 1948, and the two sides reached an initial agreement for an urgent bailout last September.
The crisis that the island has been experiencing for more than a year is partly attributed to erroneous fiscal policies and the very high indebtedness, to which is added the drop in foreign currency income during the coronavirus pandemic.
The Asian nation has a debt of about US$6,000 million per year for the next five years, ten times more than the foreign currency reserves available at the moment.
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social protests
The unrest in the streets in Sri Lanka is rising with the discontent of citizens with the increase in taxes and the prices of fuel and electricity, as part of the measures taken by the Government of the island country to meet the requirements for a financial rescue plan of the International Monetary Fund (IMF).
In this context of growing discontent, hundreds of people staged a protest last week against the recent 66% increase in electricity tariff prices, which began to be applied on February 15.
One of these unpopular policies was announced several weeks ago by the Sri Lankan President, Ranil Wickremesinghe, who restored the payment of taxes abolished by his predecessor, which meant increased obligations for citizens who already had difficulties with their living expenses. subsistence.
The package of measures requested by the IMF includes a tax reform, the increase in fuel and electricity prices, the privatization of companies, as well as considerable cuts in public spending.
Source: Ambito
