Sri Lanka faces new economic challenges as austerity measures are needed to rebuild its finances following an IMF bailout deal, President Ranil Wickremesinghe has warned. This was reported on March 22 by UCA News.
Earlier, on March 20, the IMF approved a long-delayed economic rescue package after China, the South Asian island’s biggest bilateral creditor, offered guarantees of debt relief.
The president praised the deal in his speech to parliament, calling it a milestone in the country’s economic recovery after last year’s unprecedented economic crisis.
He also noted that the bailout was just the first step in more complex structural reforms. “The IMF loan is not an end in itself, it is the beginning of a long and difficult journey,” Wickremesinghe said. “We must go through it carefully and bravely. The only objective is to restore the economy.”.
Remember that in April 2022, Sri Lanka defaulted on its $46 billion foreign debt after nearly depleting its foreign exchange reserves, making it nearly impossible for importers to purchase vital goods.
As a result, the island nation’s 22 million people experienced food and gasoline shortages for months, rampant inflation and lengthy power outages began across the country.
President Wickremesinghe tried to restore the state treasury by drastically increasing taxes and ending consumption subsidies for fuel and electricity.
On March 22, he said he planned to raise taxes to meet the IMF’s demand that Sri Lanka halve external debt service spending from 9% of GDP recorded last year.
The IMF is also demanding that Sri Lanka enact tough anti-corruption laws and sell off money-losing state-owned companies, including Sri Lankan Airlines.
The country’s unions have spoken out against the austerity program, holding strikes last week in the health and transport sectors and warning of upcoming strikes.
Source: Rossa Primavera
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