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Sri Lanka needs to stick to IMF bailout program to overcome economic crisis: Central Bank Governor

Sri Lanka’s bankrupt economy has no other option but to hang on to the existing $2.9 billion IMF bailout programme, central bank Governor Nandlal Weerasingham said on Friday. The International Monetary Fund (IMF) earlier this month authorized the release of a second tranche of $337 million to the country.

Responding to a question on whether Sri Lanka was ready to renegotiate the terms of the four-year programme, the executive said, “There is no option. The fact that we tried alternatives is why we are here now (bankruptcy). We have to follow the same path, let’s say, if the loan restructuring period is 10 years – if they (the opposition) want to change it, the creditors can say, we no longer support it. If we had to leave the programme, we would have to pay $6 billion per year in repayment,” PTI reported. It is noteworthy that the opposition parties in the country were earlier claiming that they would try to renegotiate the terms of the $2.9 billion bailout package given by the IMF.

Central bank officials were reiterating what President Wickremesinghe had said earlier this month. “There was no alternative but the IMF program to pull the cash-strapped island nation out of economic bankruptcy,” the President said on December 17. Notably, he is also the island nation’s Finance Minister.

The main opposition party Samagi Jana Balawegaya (SJB) has promised to renegotiate the terms of the bailout, saying the terms of the program were approved by the President and have created economic hardships for the public.

As part of the programme, Wickremesinghe introduced strict economic reforms such as increased personal taxes and higher utility charges. A higher value-added tax will also be implemented from January 2024, covering items such as fuel, which were previously VAT-exempt.

The President stressed that these methods are the only way to achieve long-term relief, even if they create short-term difficulties. Regarding the renegotiations, Wickremesinghe said, “There were renegotiations after the first review and it will be reviewed at the time of the second review as well.” He said that to help resolve the crisis the country is going through. It is important to maintain the IMF program to continue receiving support from the global community.

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