Sri Lanka reaches preliminary agreement with the IMF to access a bailout of USD 2.9 billion

First modification: 09/01/2022 – 18:28

The International Monetary Fund has reached a preliminary $2.9 billion bailout deal with Sri Lanka, a country of just over 20 million people that is experiencing the worst financial crisis since independence from Britain in 1948.

“This is an important step in the history of our country,” Sri Lankan President Ranil Wickremesinghe said, adding that the deal involving disbursements for the next four years would be the beginning of a new economic era.

“The agreement will help restore financial and macroeconomic stability and debt sustainability, as well as unlock the country’s growth potential,” added Peter Breuer, IMF team member in Sri Lanka.

The package is contingent on approval by the IMF’s management and executive board, as well as receiving assurances from Sri Lanka’s creditors – including China, India and Japan – that debt sustainability will be restored.

The worst economic crisis in decades

When Ranil Wickremesinghe took office in the middle of this year, his description for Sri Lanka’s economy summed it up as “collapse” due to shortages of food, fuel and electricity.

The veteran lawmaker has since faced an uphill battle to stabilize the economy, which has been hit by runaway inflation now running at nearly 65% ​​year-on-year.

Although supplies of natural gas for cooking were recently restored thanks to support from the World Bank, there are still shortages of fuel, essential medicines, some food and, above all, foreign exchange.

Sri Lanka, which has a debt of more than 50,000 million dollars, saw the origin of its crisis in administrative mismanagement and the Covid-19 pandemic that, together with terrorist attacks during Easter 2019, ended the tourism industry, key to its economy.

With Reuters and AP