About $US333 million will be disbursed immediately and the approval will also open up financial support from other institutions,the IMF said.
Sri Lankan President Ranil Wickremesinghe,left,greets speaker Mahinda Yapa Abeywardena as he arrives at the parliament to deliver his policy speech in Colombo last month.AP
The package will unlock financing of up to $US7 billion from the IMF and other international multilateral financial institutions,President Ranil Wickremesinghe’s office said.
Earlier this month,the last hurdle for the approval was cleared when China joined Sri Lanka’s other creditors in providing debt restructuring assurances.
“Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation,depleted reserves,an unsustainable public debt,and heightened financial sector vulnerabilities,” its statement quoted IMF Managing Director Kristalina Georgieva as saying.
“Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis,swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.”
Protesters have taken to the streets in Sri Lanka as they celebrate the president resigning.
Wickremesinghe said he has made some tough decisions to ensure stability,debt sustainability and to grow an inclusive and internationally attractive economy.
“From the very start,we committed to full transparency in all our discussions with financial institutions and with our creditors,” Wickremesinghe said in a statement from his office. “I express my gratitude to the IMF and our international partners for their support as we look to get the economy back on track for the long term through prudent fiscal management and our ambitious reform agenda.”
His government increased income taxes sharply and removed electricity and fuel subsidies,fulfilling prerequisites of the IMF program,but the changes were met with protests at home.
Authorities must now discuss with its creditors on how to restructure its debt.
Workers representing government institutions participate in a protest against Sri Lankan President Ranil Wickremesinghe’s tax policy in Colombo in February.AP
“Having obtained specific and credible financing assurances from major official bilateral creditors,it is now important for the authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported program,” Georgieva said.
“The authorities’ commitments to transparently achieve a debt resolution,consistent with the program parameters and equitable burden sharing among creditors in a timely fashion,are welcome,” she said.
Sri Lanka last year suspended repayment of its foreign debt amid,because of a fall in tourism and export revenue due to the COVID-19 pandemic,megaprojects funded by Chinese loans that did not generate income,and releasing foreign currency reserves to hold the exchange rates for a longer period.
The currency crisis created severe shortages of some foods,fuel,medicine and cooking gas,leading the country and resign. Protesters even invaded the presidential palace,taking up residence and swimming in the pool.
Since Wickremesinghe took over,he has managed to reduce shortages and ended hours-long daily power cuts. The Central Bank says its reserves have improved and the black market no longer controls the foreign currency trade.
However,Wickremesinghe’ s government is likely to face hostility from trade unions over his plans to privatise state ventures as part of his reform agenda and public resentment may increase if he fails to act against the Rajapaksa family,who people believe were responsible for the economic crisis.
Wickremesinghe’s critics accuse him of shielding the Rajapaksa family,who still control a majority of MPs in parliament,in return for their support for his presidency.
AP