Sri Lanka's new leader sticks within IMF 'guardrails'

COLOMBO

Sri Lanka's new leftist government has agreed to press ahead with a controversial IMF bailout programme that involves tough austerity and economic reforms, the international lender announced.

The International Monetary Fund said on Nov. 23 it reached an agreement with President Anura Kumara Dissanayake's administration to continue with the four-year loan negotiated by his predecessor last year.

"The authorities have committed to stay within the guardrails of the program," IMF team leader Peter Breuer told reporters at the end of talks with the new government.

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 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.

In his first address to parliament after his National People's Power party won a landslide at the Nov.14 election, Dissanayake backed the IMF deal last week, marking a U-turn from his election pledge.

The dissatisfaction with traditional politicians held responsible for the economic collapse was a key driver of Dissanayake's electoral success.

Dissanayake said there was no room to make any mistakes in managing the economy.