Sri Lanka $2.9 Billion Bailout Review Secures IMF Approval. The International Monetary Fund (IMF) announced on Wednesday that it has completed the third review of Sri Lanka’s $2.9 billion bailout program. This approval will unlock an additional $340 million tranche to help stabilize the country’s faltering economy. The bailout, agreed upon in March 2023, is intended to provide financial support as Sri Lanka tackles its worst economic crisis in decades.
Whereas, IMF Chief Cautions Against Premature Economic Optimism.
The IMF commended Sri Lanka for its progress in implementing key reforms under the program. Including improved fiscal discipline and efforts to restructure its debt. These measures have been crucial in stabilizing inflation, rebuilding foreign reserves, and fostering a return to growth. However, the organization highlighted the need for continued commitment to structural reforms, particularly in areas such as tax policy and governance.
Sri Lanka’s financial woes peaked in 2022 when the country defaulted on its external debt for the first time in history. The crisis, triggered by a combination of mismanagement. High levels of debt, and external shocks, led to severe shortages of essential goods, including fuel and medicine. Public unrest eventually ousted the government, paving the way for new leadership to engage with the IMF and other international creditors.
President Ranil Wickremesinghe, whose administration negotiated the bailout, welcomed the approval. Stating it reflects international confidence in Sri Lanka’s recovery efforts. He assured citizens that the government is committed to balancing fiscal discipline with measures to protect vulnerable populations.
However, critics argue that austerity measures tied to the bailout. Such as increased taxes and reduced subsidies, are exacerbating hardships for ordinary Sri Lankans. Economists have noted mixed reactions to the program. With some questioning whether the structural adjustments can deliver long-term stability without further social unrest.
As Sri Lanka moves forward, the next steps include ongoing debt restructuring negotiations with bilateral creditors and financial institutions. The IMF emphasized that success depends on strong political will and close collaboration between the government and international partners.
The approved review marks another step in Sri Lanka’s journey to economic recovery. But the road ahead remains challenging as it balances reform with the immediate needs of its citizens.
