IMF approves $2.4 billion bailout package for Sri Lanka
- On March 20, Sri Lanka received a bailout of USD 2.286 billion from the International Monetary Fund (IMF) after extensive efforts by India, Japan, and the United States to convince China to restructure its significant loan of USD 7 billion to Sri Lanka.
- According to Trueceylon, the Sri Lankan government led by President Ranil Wickremesinghe announced on Saturday that the global community no longer considers the country bankrupt. Wickremesinghe, who was elected by members of parliament in June 2022 to replace former President Gotabaya Rajapaksa, expressed his endorsement of this development.
- In the meantime, Gotabaya was accused of poor leadership, defaulted the international payments, and further harming the nation’s economy by outlawing chemical fertilizers and continuing to print money, all of which were aided at the time by then-Cemtral Bank of Sri Lanka (CBSL) Governor Nivard Cabraal, Trueceylon reported.
- The roller coaster in getting this fund processed for Sri Lanka was immense with protests on one side over the skyrocketing cost of living as well as the opposition political parties having mounting curiosity about how the IMF would react to the situation.
- The process of securing the IMF bailout for Sri Lanka was tumultuous, marked by mass protests due to the high cost of living and opposition party scrutiny regarding the IMF’s response to the country’s economic crisis. Meanwhile, the former president Gotabaya Rajapaksa was accused of poor leadership, defaulting on international payments, and worsening the economy by banning chemical fertilizers and increasing money printing, with the aid of the then-Central Bank of Sri Lanka Governor Nivard Cabraal, according to Trueceylon.
- The IMF Board has approved a 48-month extended arrangement under the Extended Fund Facility (EFF) of Special Drawing Rights (SDR) to support Sri Lanka’s economic policies and reforms, according to recent reports. This marks a significant milestone for Sri Lanka as it seeks to recover from the economic crisis brought about by the COVID-19 pandemic and other factors. The IMF’s support is expected to provide much-needed financial assistance and help Sri Lanka implement structural reforms aimed at improving the country’s economic prospects in the long term.
- The IMF Board’s approval of a 48-month extended arrangement under the Extended Fund Facility (EFF) of Special Drawing Rights (SDR) to support Sri Lanka’s economic policies and reforms was made possible after the country received IMF-compatible financing assurances from its official creditors, including Paris Club members, Japan, India, and China. The program, which was reached on September 1, 2022, is expected to restore macroeconomic stability and debt sustainability while also safeguarding Sri Lanka’s financial system and protecting vulnerable groups. This four-year program is expected to provide the policy space needed to address the unprecedented challenges facing Sri Lanka’s economy and instil confidence among all stakeholders. Trueceylon has reported on this development.
- The recent approval of the IMF bailout for Sri Lanka is expected to provide a much-needed boost to the country’s struggling economy. However, it remains to be seen whether the government can successfully implement the IMF’s guidelines, which may prove to be a significant challenge. While the bailout is a positive development, analysts warn that it is not a cure-all solution for Sri Lanka’s economic problems. Additionally, India has committed to providing financial assistance to Sri Lanka, which could further support the country’s recovery efforts.
- According to Trueceylon, India has expressed its role in advocating for Sri Lanka’s IMF bailout as an IMF member, while the US ambassador to Sri Lanka, Julie Chung, welcomes the approval of Sri Lanka’s IMF package as an important step towards economic recovery. Chung also emphasized the need for the Sri Lankan government to continue reforms and conclude debt restructuring agreements to ensure the program’s success and economic stability. In addition, the European Union office in Colombo tweeted their support for the IMF executive board’s approval and thanked the creditors, including EU member states, for working together to assist Sri Lankans. Good governance and transparency reforms were also highlighted as critical to ensuring the prosperity of all Sri Lankan citizens.
- President Wickremesinghe issued a special statement after the IMF Executive Board approved the extended credit facility, stating that the loan serves as a signal from the international community that Sri Lanka has the capability to restructure its debt and return to normal economic activity. Wickremesinghe, who assumed office in July 2022, expressed his gratitude to the IMF and Sri Lanka’s creditors for their support in this critical time.
- Following the approval of the extended credit facility by the Executive Board of IMF, the Sri Lankan government has pledged to gradually ease import restrictions on essential goods, medicines, and tourism-related items as the foreign exchange situation improves. The government expressed gratitude to all countries that supported the IMF agreement and promised to present the agreement to Parliament on March 22. However, the approval process was delayed due to China’s silence regarding its debt restructuring until recently, raising concerns about its ability to secure development projects that could be financed by loans. The IMF stressed the importance of implementing effective governance reforms, including a more comprehensive anti-corruption agenda, to address the root causes of Sri Lanka’s financial crisis, which included corruption by authorities.
- It is clear that Sri Lanka’s economic recovery will require not only financial assistance but also substantial reforms and policy changes, particularly in the areas of governance, transparency, and corruption. While the IMF bailout provides a much-needed lifeline, the government must ensure that it follows through on its commitments to the IMF and implements the necessary reforms to secure long-term economic growth and stability.
- It is likely that there will be continued scrutiny and pressure on the Sri Lankan government to implement the necessary reforms and take actions to address corruption and improve governance in order to ensure the success of the IMF program and pave the way for long-term economic growth. The government will need to demonstrate a commitment to the conditions and guidelines set forth by the IMF and work to rebuild trust with its citizens and the international community.
Kumud Sharma is the First Well-Known Female Journalist of the Journalism World of Himachal Pradesh. I am the Founder, Editor in Chief, Managing Director, Promoter of Diary Times. As a Female Journalist, With My Experience of More Than Nine Years, I Tell You Every News of Himachal Pradesh From The Ground Level With Absolutely Accurate and Correct Information, Be it the Politics of Himachal Pradesh or the Ground Reality, My Perspective On Every News Will Give You Assurance. I Assure You That Every News of Mine Will Comply With the Expertise and Fact Checking Policy.
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