Colombo gets IMF bailout

SRI LANKA will kick off the next round of talks with creditors in the third week of April, president Ranil Wickremesinghe said last Wednesday (22), adding that the debtstricken nation has started to receive funds from the International Monetary Fund (IMF).

The IMF released the first tranche of about $330 million (£267.3m), part of a nearly $3 billion (£2.43bn) bailout approved by it last Monday (20), Wickremesinghe told parliament.

“This will create opportunities for low-interest credit, restore foreign investors’ confidence and lay the foundation for a strong new economy,” he said.

The IMF bailout is expected to catalyse additional support to the tune of $3.75bn (£3bn) from the likes of the World Bank, the Asian Development Bank and other lenders. It also clears the way for Sri Lanka to restructure a substantial part of its $84bn (£68bn) worth total public debt.

Sri Lanka also aims to reduce inflation to a single digit by mid-2023 and later to four per cent to six per cent, Wickremesinghe said. The country’s National Consumer Price Index rose an annual 53.6 per cent in February.

This was the 17th IMF bailout for Sri Lanka and the third since the country’s decades-long civil war ended in 2009.

Economic mismanagement, coupled with the impact of the Covid-19 pandemic, left Sri Lanka severely short of dollars for essential imports at the beginning of last year. It tipped the island nation into its worst financial crisis in seven decades.

Unlike previous bailouts, which were mainly used to bolster foreign exchange reserves, the current funds can also be used for government spending, senior IMF official Masahiro Nozaki said last Tuesday (21).