IMF to review Sri Lanka financial aid
The second review of the International Monetary Fund ‘s (IMF) Extended Fund Facility (EFF) for Sri Lanka concludes today.
Following Sri Lanka’s foreign debt default in 2022, the IMF approved a $3 billion bailout program to restructure and revive its economy. Access is largely contingent upon Colombo’s implementation of the economic reforms dictated by the IMF. This includes extensive macroeconomic restructuring, which according to senior IMF executives has started to “bear fruit”.
Given their progress with the implementation of the IMF prescribed programs, it is highly likely that they will be able to access the third tranche of the bailout agreement. Furthermore, according to the IMF, inflation had also managed to decrease from 70 percent in 2022 to 5.9 percent in March 2024. However, despite these macroeconomic successes, the implementation of these structural adjustment programs like the increase in taxes and reduction in government spending has remained unpopular domestically, with a flurry of unions and protestors actively staging strikes since last year.
Overall, while accessing the third tranche of the economic package will likely alleviate Sri Lanka’s foreign debt in the short term, civilian protests against the IMF programs will likely continue in the months forward.
