Sri Lanka’s new president called on Wednesday for restarting talks with the IMF “immediately” over a $2.9 billion bailout that threw a lifeline to his bankrupt country but imposed painful austerity.
Self-avowed Marxist Anura Kumara Dissanayake won a landslide last week promising to reverse steep tax hikes, raise public servant salaries and renegotiate the International Monetary Fund rescue package secured by his predecessor.
The 2023 bailout helped end crippling shortages of food, fuel and medicine and returned the economy to growth, but its austerity measures left millions struggling to make ends meet.
“We plan to begin negotiations with the International Monetary Fund immediately,” Dissanayake said in a televised address to the nation.
In his 10-minute address, he said he also wanted to conclude a deal to restructure international sovereign bonds and secure more concessions for the cash-strapped nation.
“To advance our debt restructuring program, we are negotiating with relevant creditors to expedite the process and secure necessary debt relief,” he said.
His call to resume talks with the IMF came after the international lender of last resort said it was ready to discuss its bailout with the new administration.
“We look forward to working together with President Dissanayake… towards building on the hard-won gains that have helped put Sri Lanka on a path to economic recovery,” an IMF spokesperson in Washington said Monday.
“We will discuss the timing of the third review of the IMF-supported programme with the new administration as soon as practicable,” the spokesperson said, referring to the periodic review of the bailout.
Analysts, however, say Dissanayake likely has little room to reshape the terms of the deal.
“There are certain red lines that the IMF will not agree to negotiate,” Murtaza Jafferjee of the Colombo-based economic think tank Advocata told AFP.
The IMF would be very unlikely to budge on core components of its $2.9 billion bailout, including a ban on printing money and revenue and spending targets agreed by the last administration, he said.
Sri Lanka’s 2022 financial crisis that precipitated the bailout has proved an opportunity for Dissanayake, who saw his popularity rise after pledging to change what he called the island’s corrupt political culture.
He beat 38 other candidates to win Saturday’s presidential vote, taking more than 1.2 million more votes than his nearest rival.
His predecessor Ranil Wickremesinghe, who had imposed steep tax hikes and other unpopular austerity measures under the terms of the IMF package, came a distant third.
On Tuesday Dissanayake dissolved the 225-member parliament in which his once-marginal party had just three seats and called fresh elections for November 14, nearly a year ahead of schedule.
Courtesy The Daily Star