Sri Lanka is to receive $3bn (£2.44bn) as part of a bailout plan to help the bankrupt nation which is also facing a humanitarian crisis.
The International Monetary Fund’s (IMF) executive board will give the country $333m (£272m) immediately to help it rein in its debt to sustainable levels.
However, the IMF funding will not immediately help millions of Sri Lankans, who are being squeezed by soaring costs of
living, high income taxes of up to 36% and a 66% increase in power tariffs.
Half of Sri Lanka‘s families have been forced to reduce portions they feed their children, according to a survey by Save the Children released this month.
Economic mismanagement coupled with the impact of the COVID pandemic left Sri Lanka severely short of dollars for
essential imports at the beginning of last year, tipping the island nation into its worst financial crisis in seven decades.
The office of President Ranil Wickremesinghe said the programme would enable it to access up to $7bn in overall
funding.
“Sri Lanka is no longer deemed bankrupt by the world,” he said in a video statement.
“As our foreign currency improves, we will gradually lift import restrictions. In the first cycle we will bring in essential goods, medicines and goods needed for the tourism industry,” Mr Wickremesinghe said, adding that he expects to table the agreement with the IMF in parliament after making a detailed statement on Wednesday.
But the IMF has also said it is assessing Sri Lanka’s governance in the first case of an Asian country facing scrutiny for corruption as part of a bailout programme.
The senior mission chief for the IMF in Sri Lanka said the development lender was “conducting an in-depth governance diagnostic exercise which will assess corruption and governance vulnerabilities in Sri Lanka and provide prioritised and sequenced recommendations”.
“Sri Lanka will be the first country in Asia to undergo a governance diagnostic exercise by the IMF. We look forward to further engagement and collaboration with stakeholders and civil society organisations on this critical reform area,” Peter Breuer told reporters.
Sri Lankans took to the streets since last year demanding accountability for alleged corruption and demanding recovery of assets allegedly stolen by members of a former ruling family.
Since Mr Wickremesinghe took over from ousted ex-President Gotobaya Rajapaksa he has managed to reduce goods shortages and end hours-long daily power cuts.
The central bank says its reserves have improved and the black market no longer controls the foreign currency trade.
But Mr Wickremesinghe’s critics accuse him of shielding the Rajapaksa family, which still controls a majority of lawmakers in parliament, in return for their support for his presidency.