- The International Monetary Fund (IMF) approved a $3 billion loan program for Sri Lanka to support its economy and urged progress in debt restructuring talks between the nation and its creditors.
- The program was approved by the lender’s executive board in Washington and includes a disbursement of about $333 million in the next two days.
- The bailout will provide much-needed funding for Sri Lanka, which is grappling with high prices, supply shortages, and depleted foreign-currency reserves after defaulting on its overseas debt last year.
- Disbursements by the IMF to Sri Lanka will be tied to six-month reviews over the program’s 48-month duration.
- Fitch Ratings has said that the debt talks may drag as not all creditors agree on including local-currency sovereign borrowing in the restructuring.
- Sri Lanka is expected to have about $56 billion in external debt, or about 75% of its gross domestic product, this year.
- The country has a long track record with the IMF, securing 16 bailouts since the 1960s with the last one in 2016.
- Sri Lanka’s government is cheered by the news of the loan program, but several civil society organizations have expressed concerns over the impact of austerity measures on the population and have called for greater transparency in how the funds will be disbursed.
- IMF officials said that Sri Lanka will be subject to an in-depth governance diagnostic review, which will assess corruption and governance issues and provide recommendations.
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