Sri Lanka leader warns hard times to follow IMF bailout

Published March 22, 2023
People watch Sri Lanka’s President Ranil Wickremesinghe addressing the parliament, on a television in Colombo on March 22. — AFP
People watch Sri Lanka’s President Ranil Wickremesinghe addressing the parliament, on a television in Colombo on March 22. — AFP

Sri Lanka’s president warned Wednesday of more economic pain to come for the crisis-hit nation, with strict austerity measures needed to restore its ruined finances after an IMF bailout deal.

The International Monetary Fund approved its long-delayed rescue package on Monday after China, the South Asian island’s biggest bilateral lender, offered debt relief assurances.

President Ranil Wickremesinghe lauded the deal in a speech to parliament as a milestone in Sri Lanka’s recovery from last year’s unprecedented economic crisis.

But he also told lawmakers that the bailout was only the first step in more difficult structural reforms.

“The IMF loan is not an end in itself, this is the beginning of a long and more difficult journey,” Wickremesinghe said.

“We have to traverse it with care and courage. The only objective is to rebuild the economy.”

Sri Lanka defaulted on its $46 billion foreign debt last April after nearly exhausting its foreign exchange reserves, making it almost impossible for importers to source vital goods.

The island nation’s 22 million people endured months of food and petrol shortages, along with runaway inflation and prolonged blackouts, as a result.

Wickremesinghe has sought to restore government coffers by sharp tax hikes and ending generous consumer subsidies on fuel and electricity.

On Wednesday, he said more taxes were on the cards to meet the IMF’s demand that Sri Lanka halve its spend on foreign debt servicing from the nine per cent of GDP recorded last year.

The IMF also requires Sri Lanka to set up tough anti-corruption laws and sell off cash-bleeding state companies, including beleaguered carrier SriLankan Airlines.

Wickremesinghe said the government would assume the external debts of key public companies to make them more attractive to investors.

Trade unions have opposed the austerity programme with strikes crippling the health and transport sectors last week and warnings of further industrial action to come.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

What next for PTI?
Updated 23 Feb, 2024

What next for PTI?

THE incoming government has been carved up. With the major offices apportioned between the PML-N and PPP, the...
Tackling debt
23 Feb, 2024

Tackling debt

MANY would tend to describe a new report warning that the country is headed for “inevitable default”, which will...
Imprisoned abroad
23 Feb, 2024

Imprisoned abroad

THE issue of Pakistani prisoners imprisoned in foreign jails crops up regularly, particularly during parliamentary...
On a leash
Updated 22 Feb, 2024

On a leash

Shehbaz will not find it easy to introduce the much-needed major changes to the economy without running into resistance.
Shameful veto
22 Feb, 2024

Shameful veto

THE US has scored a hat-trick by vetoing, for the third time, a resolution in the UN Security Council calling for an...
Truth under threat
22 Feb, 2024

Truth under threat

AS WikiLeaks founder Julian Assange mounts a last-ditch effort against being extradited from the UK to the US, one...