Image Credits - CNA
Sri Lanka’s newly elected leftist government, led by President Anura Kumara Dissanayake, has decided to continue the controversial IMF bailout program despite prior opposition. The International Monetary Fund (IMF) announced the agreement on Saturday, confirming the new administration’s commitment to the four-year rescue plan negotiated last year.
IMF team leader Peter Breuer stated that the government’s decision ensures policy continuity. “Sustaining the reform momentum is critical to safeguarding the hard-won gains of the programme and achieving lasting recovery,” he said.
The $2.9 billion bailout, approved last year following Sri Lanka’s economic collapse, requires stringent austerity measures, including tax hikes, removal of energy subsidies, and restructuring of state enterprises. The country sought the IMF’s assistance after defaulting on its $46 billion external debt in April 2022. Severe foreign exchange shortages led to widespread protests and the resignation of then-president Gotabaya Rajapaksa.
Dissanayake’s support for the IMF deal significantly reverses his election campaign promises. During his first parliamentary address after his Nov. 14 electoral victory, he stressed the importance of managing the economy without mistakes.
The IMF highlighted the government’s anti-corruption pledge as vital for governance reforms, rebuilding confidence, and fostering inclusive growth. If the IMF board approves, Sri Lanka will access $333 million by year-end.
Last month, the government also agreed to restructure $14.7 billion in foreign commercial credit, fulfilling another key IMF demand to stabilize the economy. Sri Lanka’s GDP contracted by a record 7.8% in 2022, underlining the urgency of recovery measures.