The IMF has just paid a first tranche of payments to Sri Lanka to deal with the historic financial crisis that the country has been experiencing for more than a year, which has led to unsustainable inflation and...

Sri Lanka receives first part of IMF aid plan

Supporters of President Ranil Wickremesinghe watch television as he addresses the nation, after the International Monetary Fund's Executive Board approved a $3 billion loan, on the outskirts of Colombo, Sri Lanka, March 21, 2023. © DINUKA LIYANAWATTE / REUTERS

Text by: RFI Follow

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The IMF has just disbursed a first tranche of payments to Sri Lanka to deal with the historic financial crisis that the country has been experiencing for more than a year, which has led to unsustainable inflation and a shortage of many essential goods. About 308 million euros have just been paid, as part of a loan of 2.7 billion euros, paid over 4 years. The Sri Lankan president assures that this is the beginning of the recovery of the economy.

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Just after the announcement of the loan agreement of the International Monetary Fund (IMF), President Ranil Wikremesinghe came to parliament on Wednesday, very optimistic, explains our regional correspondent, Sébastien Farcis.

With this IMF agreement, we can build the future of our youth and straighten out our motherland. Because we have the assurance that Sri Lanka is no longer a bankrupt country, and that business can resume," said the Sri Lankan president.

The South Asian island and the IMF had reached an agreement in September 2022, but the program remained on hold as the institution was not satisfied with the guarantees provided by China, the country's main bilateral creditor. On March 6, 2023, Beijing granted new concessions, deemed sufficient by the IMF, which then scheduled the meeting of its Executive Board, the last step necessary to validate the aid plan.

Sri Lanka will finally have to reach an agreement with all its creditors, especially the private sector, which holds more than 40% of the country's external debt, according to data available on the website of the Sri Lankan Ministry of Finance.

Challenges

This loan imposes strict conditions: the reduction of corruption, the reduction of public spending and the increase of revenues. Taxes have already been heavily high, leading to huge protests. But for this executive of the banking sector, who prefers to remain anonymous, it is necessary to see more broadly.

« The solution to get out of this crisis is to solve our shortage of foreign exchange, and for this we must increase local production, in order to reduce imports and increase exports. We do not see any such strategy on the part of the IMF or the government. »

At the height of the crisis, Sri Lanka suffered a shortage of milk and medicines, imported goods that the country could no longer buy due to lack of foreign currency.

► Read also: Sri Lanka: fuel shortage plunges the population into poverty

Sri Lanka receives first part of IMF aid plan

Sri Lanka receives first part of IMF aid plan

Challenges

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