Sri Lanka's New Leader Backs Controversial IMF Bailout A Shift in Policy Amid Economic Fragility

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The IMF Deal

The $2.9 billion loan, secured early last year, mandates Sri Lanka to implement stringent economic measures, including substantial tax increases, the removal of generous energy subsidies, and the restructuring of over 50 loss-making state enterprises.

Despite his party, the National People’s Power, previously expressing disagreement with the IMF's debt assessment and intentions to renegotiate the bailout, Dissanayake emphasized the precarious state of the economy in his inaugural address to parliament.

Economic Concerns

"The economy is in such a state that it cannot take the slightest shock...there is no room to make mistakes," Dissanayake stated, firmly ruling out negotiations with the IMF or creditors. He stressed that this was not the time to debate the terms of the agreement, highlighting the lengthy two-year process that led to the current arrangement.

Moving Forward

The delayed third review of the four-year loan program is expected to conclude by this weekend, as the finance ministry engages in discussions with a visiting IMF delegation in Colombo. Dissanayake’s pivot to support the IMF program reflects the urgent need for stability in Sri Lanka's fragile economy.