The International Monetary Fund (IMF) Executive Board has successfully concluded the first review under Sri Lanka‘s 48-month Extended Fund Facility, unlocking access to approximately USD 337 million. This crucial financial support aims to aid Sri Lanka in restoring macroeconomic stability and achieving debt sustainability. The debt restructuring negotiations, particularly with China, were pivotal for the completion of this review, bringing a sigh of relief to the cash-strapped nation.
The debt restructuring agreement with China, which holds 52% of Sri Lanka’s total debt, was hailed as positive news by Peter Breuer, Senior Mission Chief for Sri Lanka. The IMF’s approval of the second tranche brings the total financial support disbursed so far to approximately USD 670 million, out of the total USD 2.9 billion bailout package.
While acknowledging signs of economic recovery, Breuer emphasized the importance of Sri Lanka continuing with hard economic reforms. The ongoing economic crisis has prompted unpopular reforms, including tax increases, utility tariff hikes, and VAT adjustments, causing public discontent.
Despite the positive outlook, Breuer cautioned that Sri Lanka’s economy is not entirely out of the woods, anticipating a negative growth of 3.6% in 2023, with a potential turnaround to positive growth of 1.8% in 2024. The IMF’s continued support emphasizes the need for Sri Lanka to advance revenue mobilization, align energy pricing with costs, and strengthen social safety nets to ensure sustained economic recovery.
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