IMF Approves Third Review Of Sri Lanka’s $2.9bn Bailout As Economy Shows Recovery

International Monetary Fund (IMF) has approved the third review of Sri Lanka’s $2.9 billion bailout on Saturday, acknowledging signs of economic recovery but warning that the country’s economy remains vulnerable. In a statement, the global lender confirmed it would release an additional $333 million, bringing the total funding to approximately $1.3 billion, to support the crisis-hit nation.

However, the IMF emphasized that Sri Lanka must complete a debt restructuring process involving $12.5 billion in bonds and another $10 billion with bilateral creditors, including Japan, China, and India, for the bailout program to continue. The IMF’s support, which began in March 2023, has played a key role in stabilizing the economy after Sri Lanka faced its worst financial crisis in more than seven decades in 2022.

Peter Breuer, IMF Senior Mission Chief, highlighted that meeting tax revenue goals and continuing reforms of state-owned enterprises will be crucial for Sri Lanka to achieve its primary surplus target of 2.3% of gross domestic product next year. Breuer also noted that the Sri Lankan authorities have committed to adhering to the program’s guidelines, and once a package is submitted to parliament, the IMF can proceed with the fourth review.

Sri Lanka’s President Anura Kumara Dissanayake announced that an interim budget would be presented to parliament in December, and he aims to complete the debt restructuring by the end of the month.

The country has made significant progress since the crisis, which saw inflation soar to 70% and the economy contract by 7.3% in the worst phase. However, recent months have shown improvement, with the Sri Lankan rupee rising 11.3% and inflation subsiding, with prices falling by 0.8% last month.

According to the World Bank, Sri Lanka’s economy is projected to grow by 4.4% this year, marking the first economic expansion in three years. Despite this positive outlook, challenges remain, and Sri Lanka’s long-term recovery will depend on successfully managing its debt and continuing fiscal reforms.