Sri Lankan President makes a U-turn on IMF assistance

COLOMBO: Sri Lanka’s new leader on Thursday (Nov 21) backed a controversial International Monetary Fund (IMF) bailout program, marking a reversal from his campaign promise to renegotiate a deal negotiated by his predecessor.

Leftist President Anura Kumara Dissanayake, who strengthened his grip on power last week after winning a huge majority in the legislature following his own victory in September, has vowed to maintain the IMF program.

Sri Lanka asked the IMF for a bailout package after the country defaulted on its US$46 billion foreign debt in April 2022 during an unprecedented economic crisis.

A foreign exchange shortage that left the country unable to finance even essential food and fuel imports led to months of street protests and forced then-President Gotabaya Rajapaksa to resign.

A US$2.9 billion loan received early last year required Colombo to sharply raise taxes, end generous energy subsidies and agree to restructure more than 50 loss-making state-owned enterprises.

Dissanayake’s National People’s Power Party said it disagreed with the International Monetary Fund’s debt assessment and would review the bailout program.

But in his first address to the new Parliament, where his party has a two-thirds majority, Dissanayake said the economic recovery was too fragile to risk.

“The economy is in such a state that it cannot withstand the slightest shock… there is no room for mistakes,” he said, ruling out negotiations with either the IMF or creditors.

“Now is not the time to discuss whether the terms are good or bad, whether the agreement is beneficial to us or not… The process took about two years, and we cannot start all over again,” he said.

The delayed third review of the four-year lending program could be completed by this weekend when the Finance Ministry holds talks with an IMF delegation in Colombo, he added.