Sri Lankan President warns hard times will follow IMF bailout

Sri Lanka's 22 million people endured months of food and petrol shortages, along with runaway inflation and prolonged blackouts. PHOTO: AFP

COLOMBO – Sri Lanka’s President Ranil Wickremesinghe warned on Wednesday of more economic pain to come for the crisis-hit nation, with strict austerity measures needed to restore its ruined finances after an International Monetary Fund (IMF) bailout deal.

The IMF approved its long-delayed rescue package on Monday after China, the South Asian island’s biggest bilateral lender, offered debt relief assurances.

Mr Wickremesinghe lauded the deal in a speech to Parliament as a milestone in the country’s recovery from 2022’s unprecedented economic crisis.

But he also told lawmakers that the bailout was only the first step in more difficult structural reforms.

“The IMF loan is not an end in itself, this is the beginning of a long and more difficult journey,” Mr Wickremesinghe said.

“We have to traverse it with care and courage. The only objective is to rebuild the economy.”

Sri Lanka defaulted on its US$46 billion (S$61.5 billion) foreign debt last April after nearly exhausting its foreign exchange reserves, making it almost impossible for importers to source vital goods.

The island nation’s 22 million people endured months of food and petrol shortages, along with runaway inflation and prolonged blackouts, as a result.

Mr Wickremesinghe has sought to restore government coffers by raising taxes sharply and ending generous consumer subsidies on fuel and electricity.

On Wednesday, he said more taxes were on the cards to meet the IMF’s demand that Sri Lanka halve its spending on foreign debt servicing from the 9 per cent of gross domestic product recorded in 2022.

The IMF also requires Sri Lanka to set up tough anti-corruption laws and sell off cash-bleeding state companies, including beleaguered carrier SriLankan Airlines.

Mr Wickremesinghe said the government would assume the external debts of key public companies to make them more attractive to investors.

Trade unions have opposed the austerity programme with strikes that crippled the health and transport sectors last week.

They have warned of further industrial action. AFP

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