IMF grants $3 billion bailout to Sri Lanka

The Asian country declared bankruptcy in April 2022, and has been waiting for this injection of resources ever since. The government promised to establish a series of reforms that will impact citizens.

The President of Sri Lanka, Ranil Wickremesinghe, announced this Tuesday (03.21.2023) that the International Monetary Fund (IMF) had approved his rescue request for 3,000 million dollars, essential to keep the economy of the South Asian country afloat, which is declared bankrupt in April 2022, in the midst of a deep crisis due to a shortage of foreign currency reserves.

The international institution confirmed that it had authorized the loan, in a 48-month agreement under the Expanded Fund Service, but its managing director, Kristalina Georgieva, warned that the country must continue with its fiscal reform, improve the social protection network for the poor classes and control corruption.

“I express my gratitude to the IMF and our international partners for their support as we try to turn the economy around in the long term through prudent fiscal management and our ambitious reform agenda,” the president said in a statement. Sri Lanka will receive “immediately” 330 million dollars, stipulates the agreement reached.

Mitigate the impacts

The IMF officials pointed out that the island nation’s public debt is “unsustainable, being 128 percent of the gross domestic product at the end of 2022”, and justified the delay in granting the bailout due to the need to obtain guarantees from official bilateral creditors. The IMF stressed that the impact of the reforms on the most vulnerable sectors of the population “must be mitigated with appropriate measures.”

At the height of the financial crisis, the island nation of 22 million people could not finance even the most essential imports such as food, fuel or medicine, sparking strong protests and forcing the former president to resign and leave the country last July. Gotabaya Rajapaksa. He was replaced by Wickremesinghe who, since then, has implemented a policy of budget cuts and tax increases to guarantee this four-year aid program from the IMF.