Sri Lanka receives first tranche of IMF bailout, says president

Ranil Wickremesinghe says his government will kick off the next round of talks with creditors in the third week of April.

sri lanka
Rescue package comes as the island nation grapples with its worst economic crisis in 70 years [File: Ishara S Kodikara/AFP]

Sri Lanka has received the first tranche of its bailout package from the International Monetary Fund (IMF), President Ranil Wickremesinghe told parliament.

“This sets the stage for Sri Lanka to have better fiscal discipline and improved governance,” Wickremesinghe said on Wednesday.

The first tranche of $330m comes after the IMF on Monday approved a $3bn rescue package for the crisis-stricken island nation.

Wickremesinghe said his government officials will kick off the next round of talks with bondholders and bilateral creditors in the third week of April.

“This will create opportunities for low-interest credit, restore foreign investors’ confidence and lay the foundation for a strong new economy,” he said.

The IMF bailout is expected to catalyse additional support to the tune of $3.75bn from the likes of the World Bank, the Asian Development Bank and other lenders. It clears the way for Sri Lanka to rework a substantial part of its $84bn worth of public debt.

China, Sri Lanka’s biggest bilateral creditor, earlier this month agreed to restructure its loans to the country, clearing the final hurdle to receiving the IMF bailout.

Sri Lanka also aims to reduce inflation to a single digit by mid-2023 and later to 4-6 percent, Wickremesinghe said. The country’s National Consumer Price Index rose an annual 53.6 percent in February.

State finance minister Shehan Semasinghe said in an interview that Sri Lanka is ready to engage in restructuring talks with bilateral and private creditors to recover debt sustainability as “soon as possible”.

This was the 17th IMF bailout for Sri Lanka and the third since the country’s decades-long civil war ended in 2009.

Unlike previous bailouts, which were mainly used to bolster foreign exchange reserves, the funds from the current programme can also be used for government spending, senior IMF official Masahiro Nozaki said on Tuesday.

Al Jazeera’s Minelle Fernandez, reporting from Colombo, on Tuesday said the president intends to use the first tranche of IMF money in areas bearing the brunt of the crisis, including healthcare and tourism.

Economic mismanagement and the fallout of the COVID-19 pandemic has left Sri Lanka with a shortage of dollars for essential imports at the beginning of last year, plunging the country into its worst financial crisis since independence.

The crisis has seen Sri Lankans grapple with soaring living costs, high income taxes of up to 36 percent and a 66 percent increase in power tariffs.

Source: Al Jazeera and news agencies