IMF board to consider approval for Sri Lanka’s bailout package

The Executive Board of the International Monetary Fund, IMF, will consider Sri Lanka’s bailout package for approval on Monday. The bailout will be through a 2.9 billion dollar extended fund facility available through tranches over a 4 year period. The facility was discussed in the staff level agreement which Sri Lanka had finalised with IMF in September last year.

The Board’s approval is also expected to unlock further funding through other multilateral institutions like World Bank.

Sri Lanka has secured financing assurances from all its major bilateral creditors for the IMF Executive Board to consider the bailout package for the country. India was the first creditor nation to have extended financing assurances to the IMF in January this year. The bailout could not be submitted to IMF board for over the last two months as financing assurances from China were received only this month. The expected IMF bailout is seen as a necessary early step on a long road to economic recovery.
The Lankan rupee had surged 8% and stocks climbed 5% this month, beating their Asian peers anticipating the IMF’s approval for the bailout. Since defaulting on its dollar debt in April last year, Sri Lanka has taken tough measures to put its economy back on a steadier path. Some of the measures include cutting subsidies, raising taxes and loosening its control on the currency.

If approved, this would be Sri Lanka’s 17th programme with the IMF, after which the focus will shift to debt talks which experts say could take some time. The island nation had last obtained a bailout from IMF in 2016. Sri Lanka is going through its worst ever economic crisis since its independence in 1948, with an acute shortage of foreign exchange reserves.