Sri Lanka: IMF aid plan validated, but conditional on implementation of reforms

Sri Lankans protest against the increase in income tax decided in the midst of the historic economic crisis. Colombo, 22 February 2023. AP - Eranga Jayawardena

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It is a breath of fresh air for Sri Lanka: the International Monetary Fund (IMF) validates the aid plan of $ 2.9 billion for a period of 48 months. An initial amount of $333 million was immediately disbursed to Colombo. But this IMF aid is conditional on the implementation of reforms.

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This plan should enable Sri Lanka to emerge from the crisis. Business contracted by 7.8% in 2022. Inflation, even if it has fallen, is still at a record level: more than 50% this year. But to qualify for this IMF aid, Sri Lanka must restructure its debt and implement structural reforms.

Agreement with creditors

Regarding the external debt, which amounts to 46 billion dollars, the government has already reached an agreement with its creditors, the most important: China, Japan and India. A comprehensive debt restructuring plan must be finalized by June. At the moment when the IMF verifies that the reforms demanded - in return for its aid - have been implemented.

To reduce the public deficit, the government has also raised taxes and removed energy subsidies. But these measures have led to strikes and protests across the country.

► Read also: Sri Lanka: a new national strike to protest against the increase in taxes

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Read on on the same topics:

• Sri Lanka
• IMF
• Finance
• Economy
• Economic crisis