IMF approves $2.9bln loan to Sri Lanka

By Al Mayadeen English
Source: Agencies
20 Mar 22:14

The country's President claims that the loan will assist the South Asian nation put its economy back on track and support its "reform agenda".

The International Monetary Fund (IMF) logo seen outside the headquarters building in Washington, US, September 4, 2018 (Reuters)

The International Monetary Fund (IMF) has approved a $2.9 billion loan to Sri Lanka under a four-year program as the South Asian country suffers from an unprecedented financial crisis affecting its 22 million population.

"I express my gratitude to the IMF and our international partners for their support as we look to get the economy back on track for the long term through prudent fiscal management and our ambitious reform agenda," the country's President Ranil Wickremesinghe said on Monday.

China's approval earlier this month to restructure its loans to Sri Lanka has paved the way for the funds' $2.9 billion bailout approval, as Beijing is considered one of the largest creditors of the struggling country.

Sri Lanka defaulted on its $46 billion foreign debt in April 2022 and was negotiating a bailout deal with the IMF to repair its shattered finances. The country witnessed months of lack of food, fuel, and medicine, extended power cuts, and inflation - which in turn has caused civil unrest and public outrage.

Months of protests during the height of the crisis pushed then-President Gotabaya Rajapaksa to depart the country and resign in July 2022 following accusations of economic mismanagement and corruption.

His successor, Wickremesinghe, has negotiated with international creditors and imposed tax hikes "to smooth passage of the IMF bailout."

The President's office stated earlier Monday that he was seeking to restructure the country's debts over a 10-year period.

The country must agree on joint terms for the debt restructuring plan no later than June when the IMF is expected to study the bailout program.

"Sri Lanka will not be able to draw down the second tranche unless a debt restructuring plan is agreed with all creditors," said an official informed on the country's negotiations with the fund.

The country is also counting on the release of billions of dollars in foreign aid - that were frozen since Colombo's debt default last year - after the IMF deal is finalized.