Sri Lanka expects IMF staff level agreement on Friday to release further bailout funds

COLOMBO: Sri Lanka expects the IMF to announce a staff level agreement on its third review of the country’s bailout programme on Friday, President Anura Kumara Dissanayake told the first sitting of the new parliament.

Once IMF executive board approval is given, a further tranche of about $337 million in funds is expected to be released to Sri Lanka.

Dissanayake’s Marxist-leaning National People’s Power (NPP) coalition won a record 159 seats in the 225-member parliament in a general election last week.

A delegation from the International Monetary Fund is in Colombo for the third review of its $2.9 billion programme and will hold a press briefing on Saturday.

Dissanayake also outlined plans to complete a $12.5 billion debt restructuring with bondholders in December.

Sri Lanka will enter into individual agreements with bilateral creditors including Japan, China and India needed to complete a $10 billion debt restructuring, he added.

“Our economy is hanging by a thread. This economy cannot absorb any shocks. We have to think deeply and in detail about the policy decisions we take.

Sri Lanka to begin talks with IMF to take forward $2.9bn bailout, president says

The moment we obtained power our priority was to build confidence and reassure stakeholders,“ he told lawmakers.

“We need to do much more to put the economy on a stable path.”

A nation of 22 million, Sri Lanka was crushed by a 2022 economic crisis triggered by a severe shortage of foreign currency that pushed it into a sovereign default and caused its economy to shrink by 7.3% in 2022 and 2.3% last year.

The president will have to present an interim budget in the next few weeks, as well as find ways to reduce taxes and increase welfare, which were his key election pledges, without derailing the IMF programme.

Sri Lanka is expected to grow 4.4% in 2024, according to World Bank data, for the first time in three years.