Colombo: Crisis-hit Sri Lanka has reached a preliminary agreement with the International Monetary Fund for a loan of about USD 2.9 billion. IMF staff and the Sri Lankan authorities have reached a staff-level agreement to support Sri Lanka's economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about 2.9 billion US dollars, the IMF said in a statement. The objective is to restore macroeconomic stability and debt sustainability while safeguarding financial stability, among other factors, it added.
The IMF calls for action to raise fiscal revenue by implementing tax reforms, introducing cost recovery-based pricing for fuel and electricity, raising social spending to help the poor and the vulnerable in the ongoing economic crisis, restoring flexible exchange rate, a capitalised banking system and a stronger anti-corruption legal framework.
Sri Lanka's former President Gotabaya Rajapaksa fled the country following a public uprising against his government for mismanaging the economy. Rajapaksa was replaced by his ally Wickremesinghe, who is also the country's Finance Minister and is leading the talks with the IMF delegation. The country is also expected to restructure its debt worth $ 29 billion with Japan and other creditor nations, including China on this issue.
In mid-April, Sri Lanka declared its international debt default due to the forex crisis. The country owes $ 51 billion in foreign debt, of which $ 28 billion must be paid by 2027. Sri Lanka's inflation level hit a whopping 64.3 per cent for August, continuing to spike as fuel became expensive.
In its latest assessment, the World Bank has said that Sri Lanka has been ranked 5th with the highest food price inflation in the world. Sri Lanka is ranked behind Zimbabwe, Venezuela and Turkey, while Lebanon leads the list.
