President Ranil Wickremesinghe told Parliament on Wednesday that the IMF bailout had restored Sri Lanka’s international recognition, ending the image of bankruptcy and helping the local banks regain foreign investors’ confidence.
The IMF board had on Tuesday approved a $3 billion facility over a four-year period to help Sri Lanka emerge from its balance of payment crisis which plagued the island since April last year. Wickremesinghe said the bailout would “create opportunities for low-interest credit, restore foreign investors’ confidence, and lay the foundation for a strong new economy."
The receipt of the IMF Facility is a step towards building a better future for the youth and uplifting the country. Additionally, the country is expecting about $7 billion dollars more in rapid credit support from other parties. “Amidst numerous hardships, bearing all kinds of pressure, and undergoing suffering with equanimity, the people of this country remained calm and patient. Their commitment was a great strength in achieving the IMF Facility,” Wickremesinghe, also the country's finance minister, said. Wickremesinghe, however, reminded the hard grind ahead of Sri Lanka with having to reform the vital sectors of the economy.
“We are now starting a new journey. We have to introduce many economic reforms throughout the process. The foundation for our success will be through this path. Some of these reforms have already been proposed and implemented through the interim budget of 2022 and the budget for 2023. We will introduce numerous other reforms," he said.
Wickremesinghe said he was able to gain the IMF facility and revive the economy without any support from the opposition despite his appeals for them to join him. He sought parliamentary approval for the agreement with the IMF, “without parliamentary approval I will not be able to go for the second round of negotiations”, he said.
For Wickremesinghe, the hard task of negotiating with its bilateral and private bondholders has started. He has indicated Sri Lanka would be helped with a 10-year moratorium on debt repayment. Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis.
The economy is facing significant challenges stemming from pre-existing vulnerabilities and policy missteps in the lead-up to the crisis, further aggravated by a series of external shocks, the IMF said. The EFF-supported programme aims to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, safeguard financial sector stability, and strengthen governance and growth potential, said the statement.
It said that the Executive Board’s decision will enable an immediate disbursement equivalent to SDR 254 million (about $333 million) and catalyse financial support from other development partners. Sri Lanka in April declared its first-ever debt default in its history as the worst economic crisis since independence from Britain in 1948 triggered by forex shortages sparked public protests.
Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support. Sri Lanka has introduced painful economic measures such as tax hikes and utility rate hikes to unlock the programme. Trade unions and opposition groups have organised protests against such measures.
The programme will allow Sri Lanka to access financing of up to $7 billion from the IMF, International Financial Institutions (IFIs), and multilateral organisations, a statement said.