IMF: Amid tremendous economic and social challenges in Sri Lanka, the International Monetary Fund (IMF) approved a nearly $3 billion bailout program for the country over four years to help salvage the country's bankrupt economy. IMF on Monday (March 20) announced that the executive board has approved the bailout program. According to IMF, about $333 million will be disbursed immediately.
Sri Lanka facing heightened financial sector vulnerabilities
“Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities," its statement quoted IMF Managing Director Kristalina Georgieva as saying.
Approval will unlock financing of up to $7 billion from the IMF
“Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.” The approval will unlock financing of up to $7 billion from the IMF and other international multilateral financial institutions, President Ranil Wickremesinghe's office said.
Earlier this month, the last hurdle for the approval was cleared when China joined Sri Lanka's other creditors in providing debt restructuring assurances.
Wickremesinghe expressed his gratitude
“From the very start, we committed to full transparency in all our discussions with financial institutions and with our creditors," Wickremesinghe said in a statement from his office. "I express my gratitude to the IMF and our international partners for their support as we look to get the economy back on track for the long term through prudent fiscal management and our ambitious
reform agenda.”
Wickremesinghe said he has made some tough decisions to ensure stability, debt sustainability and to grow an inclusive and internationally attractive economy. Sri Lanka increased income taxes sharply and removed electricity and fuel subsidies, fulfilling prerequisites of the IMF program. Authorities must now discuss with Sri Lanka's creditors how to restructure its debt.
Authorities are expected to make swift progress
“Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported program," Georgieva said.
“The authorities' commitments to transparently achieve a debt resolution, consistent with the program parameters and equitable burden sharing among creditors in a timely fashion, are welcome,” she said.
(with inputs from Agencies)
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