IMF Conducts Key Review in Sri Lanka Amid Political Shifts

The IMF has arrived in Sri Lanka for a critical review of its USD 3 billion bailout facility amidst political changes. The review, delayed by elections, could unlock the fourth tranche of aid. Sri Lanka's new government faces IMF scrutiny over economic reforms and debt restructuring.

The International Monetary Fund (IMF) team landed in Sri Lanka on Sunday to assess the third review of a nearly USD 3 billion bailout, as confirmed by Finance Ministry officials.

The current review could pave the way for the release of the fourth tranche, totaling about USD 330 million, similar to previous tranches, according to ministry sources.

Sri Lanka's economic reform strategy is underpinned by the IMF's Extended Fund Facility (EFF). The review was initially postponed pending the presidential election's outcome, with further delays caused by recent parliamentary elections called by the new National People's Power (NPP) government.

This meeting marks the first engagement between the NPP and IMF since NPP's sweeping electoral win secured total control of the 225-member parliament.

Despite a campaign critical of IMF conditions, President Anura Kumara Dissanayake has remained quiet about the critique since assuming office, succeeding Ranil Wickremesinghe.

Dissanayake expressed optimism at the final election rally, anticipating the fourth tranche's disbursement by February, contingent on the third review's completion.

The review will evaluate Sri Lanka's progress on program targets, like state revenue and reserve accumulation.

Debt restructuring, initiated under the Wickremesinghe administration, awaits formalization. The IMF mandates restructuring deals with both bilateral and sovereign bondholders to ensure fiscal sustainability.

Amidst an economic crisis, Sri Lanka sought IMF aid during Gotabaya Rajapaksa's presidency, marked by national protests that led to his departure. Amid intense public unrest, Sri Lanka announced its first-ever debt default in mid-April 2022.

Negotiations with the IMF commenced post-default, culminating in a bailout secured in March 2023 by Wickremesinghe's administration. Prior to this, a USD 4 billion Indian credit line was vital for essentials like fuel.

(With inputs from agencies.)