Sri Lanka Needs To Stick To IMF Bailout Programme To Overcome Economic Crisis: Central Bank Governor

The opposition parties in the country were claiming earlier that they would attempt to renegotiate the terms for the $2.9 billion bailout package given by the IMF. 

As part of the programme, strict economic reforms like increasing personal taxes and high utility tariffs were introduced in the country.

Sri Lanka’s bankrupt economy has no other choice but to stick to the current $2.9 billion IMF bailout programme, central bank governor, Nandalal Weerasinghem said on Friday. The International Monetary Fund (IMF) authorised the release of the second tranche worth $337 million to the country earlier this month. 

Replying to queries if Sri Lanka was open to renegotiating the terms of the four-year programme, the executive said, “There is no alternative. The fact that we attempted alternatives was why we are here (bankruptcy) now. We have to go in the same path, say, if the period of debt restructuring allowed is 10 years – if they (opposition) want to change it, the creditors can say, we don’t support this anymore. If we were to leave the programme, we will have to pay $6 billion a year in repayments,” reported PTI. Notably, the opposition parties in the country were claiming earlier that they would attempt to renegotiate the terms for the $2.9 billion bailout package given by the IMF. 

The central bank official was reiterating what President Wickremesinghe said earlier in the month. “There was no alternative to the IMF programme for the cash-strapped island nation to get out of its economic bankruptcy,” the President said on December 17. Notably, he is also the Finance Minister for the island nation. 

The main opposition party Samagi Jana Balawegaya (SJB) has promised to rediscuss the terms of the bailout stating that the conditions attached to the programme were given a nod by the President and has created economic hardships for the public. 

As part of the programme, Wickremesinghe introduced strict economic reforms like increasing personal taxes and high utility tariffs. A higher Value Added Tax will also be implemented from January 2024, covering items like fuel, which were earlier VAT-free. 

The President insisted that these methods were the only way to achieve long-term relief, even as they create short-term difficulties. Regarding the renegotiating, Wickremesinghe said, “There was renegotiation after the first review and it will be reviewed at the time of the second review too.” He added that it was crucial to maintain the IMF programme to continue receiving support from the global community to help resolve the crisis the country is going through.