IMF to work with Sri Lanka leader on US$3 billion loan
Dissanayake has promised to reopen negotiations with the IMF on the country’s big loan programme
THE International Monetary Fund (IMF) said it is looking forward to working with Sri Lanka’s newly elected leftist president, including on the latest review of the country’s US$3 billion bailout package.
“We will discuss the timing of the third review of the IMF-supported programme with the new administration as soon as practicable,” the organisation said in a statement after President Anura Kumara Dissanayake was sworn into office on Monday (Sep 23).
“We look forward to working together with President Dissanayake and his team towards building on the hard-won gains that have helped put Sri Lanka on a path to economic recovery since entering one of its worst economic crises in 2022,” the IMF added.
Dissanayake had campaigned on a promise to reopen negotiations with the IMF on the country’s big loan programme. It came with deeply unpopular tax hikes and spending cuts that made the cost-of-living crisis a top issue for voters.
Reviewing the debt plan, though, risks delaying additional loans from the international organisation. Sri Lanka needs to meet certain fiscal criteria before the next round of funding is released.
Sri Lanka’s dollar bonds were steady on Tuesday, regaining losses made following Dissanayake’s win at the polls. The bond maturing in March 2029 edged higher to trade at 51.485 cents to the dollar, after falling by the most in over two years on Monday.
The country’s former president, Ranil Wickremesinghe, brokered the deal with the IMF and said upending it would be a costly mistake for the economy. Prior to the cash injection, the country faced an unprecedented economic crisis where spiralling inflation wiped out household savings and ignited protests.
Investors hope that Dissanayake will stick with the loan plan. Rizvie Salih, an executive committee member of the president’s coalition party, said on Saturday that the country will remain with the programme but seek modifications.
In its statement, the IMF said the recent agreement with bondholders “represents significant progress in Sri Lanka’s debt restructuring process,” adding that it’s still “subject to confirmation on comparability of treatment by Sri Lanka’s Official Creditors Committee”. BLOOMBERG
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