Sri Lanka’s new leftist government sticks within IMF ‘guard rails’

Sri Lanka’s new leftist government has agreed to press ahead with a controversial IMF bailout programme that involves tough austerity and economic reforms, the international lender announced on Saturday.

The International Monetary Fund said it reached an agreement with President Anura Kumara Dissanayake’s administration to continue with the four-year loan negotiated by his predecessor last year.

“The authorities have committed to stay within the guard rails of the programme,” IMF team leader Peter Breuer told reporters at the end of talks with the new government.

He said the new government’s commitment ensured policy continuity.

“Sustaining the reform momentum is critical to safeguarding the hard-won gains of the programme, and putting the economy on a path towards lasting recovery and stable and inclusive growth,” Breuer added.

Sri Lanka went to the IMF for a rescue package after the country defaulted on its US$46 billion external debt in April 2022 during an unprecedented economic meltdown.

The shortage of foreign exchange, which left the country unable to finance even the most essential imports of food and fuel, led to months of street protests and forced then-president Gotabaya Rajapaksa to resign.