Sri Lanka Aid Package Discussions with IMF to Conclude
Talks between Sri Lanka and the International Monetary Fund (IMF) regarding a new aid package will end today.
Negotiations between the new administration, led by President Ranil Wickremesinghe, and the IMF revolve around a package worth an estimated $3 billion and the restructuring of Sri Lanka’s $29 billion in debt.
Both the IMF and the Wickremesinghe administration have acknowledged the inefficiency of the Sri Lankan public sector, which has doubled to 1.5 million workers in the last 15 years. Consequently, discussions with the IMF on how best to fix the economy have brought blanket subsidies and state-owned enterprises (SOE) to the forefront—two areas of patronage that ex-President Gotabaya Rajapaksa’s government used to solidify its political power.
Expect the $3 billion loan package for Sri Lanka to be approved by the IMF and that any deal will take aim at the deconstruction or partial privatization of SOEs and ending blanket subsidies. Most subsidies are likely to be stricken, helping to undo the entrenched patronage of the Rajapaksa administration, but executing SOE wage cuts or layoffs could lead to backlash from thousands of public sector employees. President Wickremesinghe will have to walk a fine line between economic necessity and political reality.
