IMF approves Sri Lanka’s much-awaited bailout package

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21 Mar 23
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IMF approves Sri Lanka’s much-awaited bailout package

The Executive Board of the International Monetary Fund has approved Sri Lanka’s bailout program under an Extended Fund Facility. The package of 2.286 billion special drawing rights equivalent to about 3 billion dollars will be available over 4 years. The Executive Board’s decision will enable an immediate disbursement of 333 million dollars.

With the approval of the much-awaited bailout, Sri Lanka will look to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, and stepping up structural reforms to unlock its growth potential.

Managing Director of IMF Kristalina Georgieva said it is now important for the Sri Lankan authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported program. Ms. Georgieva added that Sri Lanka should stay committed to the multi-pronged disinflation strategy to safeguard the credibility of its inflation-targeting regime.

Sri Lankan President Ranil Wickremasinghe welcomed the announcement and thanked the creditors and the IMF. Since defaulting on its dollar debt in April last year, Sri Lanka has taken tough measures to put its economy back on a steadier path. Some of the measures include cutting subsidies, raising taxes and loosening its control on the currency. With the IMF programme approved, Sri Lanka will look to unlock further funding lines through other International Financial Institutions and multilateral organisations.

This is Sri Lanka’s 17th credit programme with the IMF. The focus now shifts to debt talks which experts say could take some time. Sri Lanka is going through its worst-ever economic crisis since its independence in 1948, with an acute shortage of foreign exchange reserves. India had provided unprecedented and generous assistance of 4 billion dollars to the island nation to tide over the crisis.

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