IMF announces Sri Lanka programme aimed at island’s economic recovery 

“The objectives of the EFF-supported programme are to restore macroeconomic stability and debt sustainability, safeguarding financial stability, and stepping up structural reforms to unlock Sri Lanka’s growth potential,” the IMF said, of Sri Lanka’s 17th programme with the Fund.

The International Monetary Fund (IMF) on March 21 cleared a $3 billion-Extended Fund Facility (EFF) for Sri Lanka, potentially unlocking more loans for the debt-ridden island nation, struggling to recover from last year’s economic meltdown.     

“The objectives of the EFF-supported programme are to restore macroeconomic stability and debt sustainability, safeguarding financial stability, and stepping up structural reforms to unlock Sri Lanka’s growth potential,” the IMF said, of Sri Lanka’s 17 th programme with the Fund.

After India, China gives financing assurances to Sri Lanka for IMF bailout package

It comes about a year after the country went in for a premature default on its foreign debt amid an acute dollar crunch, and six months after reaching a staff-level agreement with the IMF.

“In the 75 years of Sri Lanka’s independence, there has never been a more critical period for our economic future. IMF Executive Board approved our programme, enabling Sri Lanka to access up to $7b in funding from IMF & IFIs. I thank the IMF & our international partners for support,” President Ranil Wickremesinghe said in a tweet Tuesday morning.  

India, Japan [as a member of the Paris Club group of creditors], and China, Sri Lanka’s top three bilateral creditors, played a crucial role in unlocking IMF assistance to the island, by providing financing assurances to the Fund. In an open letter to bilateral creditors last week, President Wickremesinghe pledged transparency in the debt restructuring process with creditors, and “comparable treatment of all external creditors”.

While Sri Lanka has been desperate for the IMF’s assistance since last year’s financial crash, securing an EFF of nearly three billion dollars, over four years, hardly guarantees swift economic recovery, Sri Lankan economists have cautioned. As of December 2022, Sri Lanka’s total outstanding public debt increased to $ 84 billion, Colombo-based think tank Verite Research said in its latest debt update. Further, Sri Lanka must service multilateral debt totalling over $ 2 billion during the first half of this year, besides addressing its trade deficit and currency volatility. The IMF has also repeatedly flagged corruption as a key issue in Sri Lanka and will up a “governance diagnostic exercise”, its first in Asia.