The International Monetary Fund announced it has reached a preliminary agreement to provide Sri Lanka with $2.9 billion over four years to help it recover from its worst economic crisis.
The arrangement will help restore financial and macroeconomic stability and debt sustainability as well as enable the country’s growth potential.
IMF’s Peter Breuer said that since Sri Lanka’s debt is currently unsustainable, the lender will need to see an engagement between the country and its creditors before it can commit resources.
Sri Lanka is in the midst of an unprecedented economic crisis with acute months long shortages of essentials such as fuel, medicine and cooking gas due to a severe shortage of foreign currency. Though cooking gas supplies were restored through World Bank support, shortages of fuel, critical medicines and some food items continue.
Sri Lanka’s economy is expected to shrink by 8.7% in 2022 with inflation rising above 60%.
Sri Lanka’s president, Ranil Wickremesinghe, said talks with the IMF had successfully reached final stages as he presented an interim budget aimed at obtaining a rescue package. Measures outlined included raising some taxes, slashing capital expenditures, taming inflation and bolstering relief programs.
