On Monday, Sri Lanka received a $3 billion loan from the International Monetary Fund (IMF) to alleviate its worst financial crisis in decades. The deal, almost a year in the making, will aim to restore macroeconomic stability and debt sustainability and unlock Sri Lanka’s growth potential, the IMF said. The island nation of 22 million was plagued by weeks of unrest last year due to food, fuel, and medicine shortages caused by record-low foreign exchange reserves, with dollars running out to pay for essential imports. Millions of Sri Lankans were left unable to feed their families, fuel their vehicles, or access basic medicine.
Sri Lanka’s former president was forced to flee the country after protesters stormed his residence and office, demanding his resignation. In July last year, President Ranil Wickremesinghe said Sri Lanka was “bankrupt,” and negotiations with the IMF were “difficult.” Monday’s loan approval will provide much-needed respite for the country as it faces an uphill climb to revive its flailing economy. The IMF will immediately disburse an initial $333 million to Sri Lanka, with more funds to follow in the coming months.
In a statement on Monday, Wickremesinghe praised the IMF’s decision, stating that the program would be imperative to improving Sri Lanka’s standing in and access to international capital markets. The loan will also demonstrate that Sri Lanka is once again attractive to talent, investors, and tourists, he said. The program will be critical for Sri Lanka to overcome the crisis, and timely implementation with strong ownership for the reforms is necessary, said IMF managing director Kristalina Georgieva in a statement. The loan will be provided through the IMF’s Extended Fund Facility (EFF), a mechanism established to provide financial assistance to struggling countries.
Last year, Sri Lankans were forced to queue for hours to purchase fuel, and rice, a staple food item, had disappeared from shelves in many stores. Amid the crisis, over 300,000 people left the country to work overseas—the highest number ever recorded, according to the government. While conditions have slowly improved, anger has remained over the country’s financial situation. In Colombo, last month, police fired tear gas and water cannons at protesters who had gathered to protest the postponement of local elections that the government could not afford to hold. Wickremesinghe previously told parliament that no local elections would be held until the country’s economy is on the right track. “The economy is my top priority. We will not have a country if the economy does not develop,” Wickremesinghe said at the time.
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