Sri Lanka’s president makes U-turn on IMF bailout

COLOMBO: Sri Lanka’s new leader on Thursday backed a controversial IMF bailout, marking a U-turn from his election pledge to renegotiate the deal secured by his predecessor.

Leftist President Anura Kumara Dissanayake, who tightened his grip on power last week after winning a huge majority in the legislature following his own victory in September, vowed to maintain the IMF programme.

Sri Lanka went to the IMF for a rescue package after the country defaulted on its $46 billion external debt in April 2022 during an unprecedented economic meltdown.The shortage of foreign exchange that left the country unable to finance even the most essential imports of food and fuel led to months of street protests and forced then-president Gotabaya Rajapaksa to resign.

The $2.9 billion loan secured early last year required Colombo to sharply raise taxes, remove generous energy subsidies and agree to restructure more than 50 loss-making state enterprises.

Dissanayake’s National People’s Power party had said it did not agree with the International Monetary Fund’s debt assessment and would renegotiate the bailout programme.But in his first address to the new parliament, where his party enjoys a two-thirds majority, Dissanayake said the economic recovery was too fragile to take risks.

“The economy is in such a state that it cannot take the slightest shock... there is no room to make mistakes,” he said as he ruled out negotiations with either the IMF or creditors.