International Monetary Fund approves 48-month arrangement with Sri Lanka under Fund facility extended for $2.9 billion package, has been welcomed by Colombo and its creditors, with whom President Ranil Wickremesinghe will now have to enter into debt restructuring agreements. Taking credit for some of the heavy lifting, India’s Ministry of External Affairs has said that India was the first Sri Lankan bilateral creditor to support debt restructuring and provide assurances to the IMF in January. Since last year, New Delhi has been an important part of Sri Lanka’s aid structure, appealing to the IMF and the World Bank on its behalf, providing a $4 billion package including credit lines, loans and debt deferrals, and debt stabilization. raises the issue of Multilateral sector including G-20. China, Sri Lanka’s largest bilateral creditor, and Japan (part of the Paris club of international financiers) did not move as quickly, stalling the IMF announcement. Announcing the first tranche of $330 million on Tuesday, Mr. Wickremesinghe said the main message was to reassure other lenders about Sri Lanka’s ability to repay its debt, and potentially get it around 7 million dollars from international institutions and the IMF. to enable it to reach billions of dollars. Some credit goes to Mr. Wickremesinghe and his cabinet who have stabilized some indicators since coming to power in challenging times last year.
However, the IMF’s decision is not a magic bullet. This is Sri Lanka’s 17th IMF bailout and the third in the last decade. The IMF loan also comes with a number of conditions, which would cause more difficulties and make the government, which has an approval rating of around 10%, more unpopular. The IMF distanced itself from the government’s decision to postpone local elections, saying it had not set any political conditions. In its report, the IMF described the risks of implementing the program as “extraordinarily high”, referring to Sri Lanka’s track record of implementing reforms as “weak”, and a deepening crisis driven by weak market indicators. Asks for contingency plans in case of , Apart from battling rising inflation, stimulating growth and inviting global investment, the government must also ensure that creditors are satisfied with its debt restructuring process and no one alleges “side-deals”. Sri Lanka appears determined to change the situation, and is mending fences with every international player engaged in its complex geopolitics, including the US, Japan, India and China. It is important that, in turn, they recognize Colombo’s precarious position and cooperate to shore up the island nation as it continues to walk a difficult economic path.
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