Sri Lanka approached the International Monetary Fund (IMF) to resolve the economic crisis. The two sides had a meeting in the capital Colombo recently. Finally there is a green signal from the IMF for assistance. The agency announced on Thursday that it will provide $2.9 billion bailout to Sri Lanka to rebuild the economy.
Due to the lack of dollars in Djerba Sri Lanka due to the economic crisis, even essential products cannot be imported. There have been months of shortages of food, fuel and medicine, and inflation has soared. Power outages have caused additional suffering. The crisis has deepened as the Sri Lankan government defaulted on its foreign debt of $5,000 billion. In this situation, Sri Lanka declared itself bankrupt.
Sri Lankan politics is also in turmoil due to the shaky economy. The general public believed that the then ruling Rajapakse family was responsible for the economic crisis in the country. People took to the streets to oust the Rajapakse family from the government. President Gotabaya Rajapaksa fled Sri Lanka last July in the face of mass protests. Later he announced his resignation from Singapore.
The IMF confirmed the bailout in a statement yesterday, 9 days after a meeting with the Sri Lankan government in Colombo. It is now awaiting final approval from the board members of the organization. Sri Lanka is facing a major crisis, the statement said.
Meanwhile, Sri Lanka has to accept some IMF conditions to get the bailout money. This includes the Sri Lankan government having to enter into a new agreement with donors to change the rules of repayment of loans taken earlier.
In addition, IMF official Peter Brewer believes that it is important to stand by Sri Lanka’s creditors to help overcome the economic crisis and repay the debt. While talking to the journalists, he said that all lenders should now work with Sri Lanka in their own interest. If they are not willing to provide this assurance, the crisis in Sri Lanka will deepen, and the country’s ability to repay the debt will be further reduced.
Meanwhile, Brewer did not confirm when Sri Lanka will receive the IMF assistance money. That said, Sri Lanka’s needs are “very urgent” and need to be addressed soon.
Sri Lanka asked the IMF for assistance of 300 to 400 million dollars. In contrast, they are getting 290 million dollars. This amount will be given for the next four years. However, Brewer pointed out that this assistance of the IMF alone is not enough to solve Sri Lanka’s economic crisis. He thinks that other donors should also stand by the country.
Economic analyst and former deputy governor of the country’s central bank, WA Bijewardena, said that the Sri Lankan government will have to take several tough steps to ensure the IMF loan. In the meantime, the government is moving towards taking some such steps. Sri Lanka has agreed to raise revenues, end subsidies, maintain a flexible exchange rate and rebuild foreign reserves, the IMF says.
The current President Ranil Wickremesinghe has announced an increase in tax rates in Sri Lanka this week. Earlier, fuel and electricity prices in the country were increased more than three times, subsidies were withdrawn. These were prerequisites for getting an IMF loan.