Sri Lanka's new president seek changes to IMF deal

Sri Lanka's new president seek changes to IMF deal

Anura Kumara Dissanayake won Sri Lanka's September 21 election promising to reverse steep tax hikes and to renegotiate the IMF bailout
Anura Kumara Dissanayake won Sri Lanka's September 21 election promising to reverse steep tax hikes and to renegotiate the IMF bailout. Photo: - / Sri Lanka's President Office/AFP
Source: AFP

Sri Lanka's new president Thursday urged the IMF to consider "alternative means" to continue with a $2.9 billion bailout that aided his country in the wake of a sovereign default but imposed painful austerity.

In his first face-to-face meeting with International Monetary Fund representatives in Colombo, self-avowed Marxist Anura Kumara Dissanayake said he wanted to reduce taxes on lower income groups.

He won his country's September 21 presidential election promising to reverse steep tax hikes, raise public servant salaries and renegotiate the controversial bailout secured by his predecessor, Ranil Wickremesinghe.

Dissanayake told the IMF that he wanted to continue with the four-year programme, which requires the government to reform loss-making state enterprises and improve governance.

Dissanayake reaffirmed "broad agreement" with the objectives of the IMF programme but "emphasised the importance of achieving these objectives through alternative means that relieves the burden off the people," his office said in a statement.

Read also

Japan PM slated to announce plans for 'happiness index'

It said the IMF delegation headed by its Director for Asia Pacific, Krishna Srinivasan, "agreed to discuss the alternative approaches proposed by the Sri Lankan government."

However, neither side gave details of the new proposals.

The 2023 bailout helped end crippling shortages of food, fuel and medicine and returned Sri Lanka's economy to growth, but its austerity measures left millions struggling to make ends meet.

The new president has said he also wants to conclude a deal to restructure $12.5 billion in international sovereign bonds and secure more concessions for the cash-strapped nation.

Analysts, however, say Dissanayake has little room to reshape the terms of the IMF deal.

Sri Lanka declared a sovereign default on its $46 billion debt in April 2022 after running out of foreign exchange.

"There are certain red lines that the IMF will not agree to negotiate," Murtaza Jafferjee of the Colombo-based economic think tank Advocata told AFP soon after Dissanayake's election.

Read also

Tokyo rallies on weak yen, Hong Kong reverses after surge

The IMF would be very unlikely to budge on core components of the bailout, including a ban on printing money as well as revenue and spending targets agreed by the last administration, Jafferjee said.

Sri Lanka's 2022 financial crisis that precipitated the bailout proved to be an opportunity for Dissanayake, who saw his popularity rise after pledging to change what he called the island's corrupt political culture.

Dissanayake has dissolved the 225-member parliament in which his once-marginal party had just three seats and called fresh elections for November 14, nearly a year ahead of schedule.

Any fresh deal with bondholders as well as the IMF requires approval by parliament, which is set to hold its first session on November 21.

PAY ATTENTION: Сheck out news that is picked exactly for YOU ➡️ find the “Recommended for you” block on the home page and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.