The International Monetary Fund (IMF) on Saturday (November 23) approved the third review of a US$2.9 billion aid package for Sri Lanka. However, the agency warned that the South Asian country's economy is still at risk. British news agency Reuters reported this.
In a statement, the IMF said, through this approval, Sri Lanka will be exempted by another 303 million US dollars. As a result, a total of 1.3 billion US dollars is going to be discounted so far.
The statement also said that Sri Lanka's economy is showing signs of recovery. But more steps are needed in debt restructuring. According to the agency, the project can only go ahead after completing the $1,250 billion bondholder loan and $1,000 billion debt restructuring with bilateral lenders like Japan, China and India.
After receiving this aid package from the IMF in March last year, Sri Lanka regained some stability from the worst financial crisis in its history. In 2022, the country fell into its worst financial crisis in seven decades.
Peter Brewer, the IMF's senior mission chief, said it was crucial for Sri Lanka to continue to focus on increasing tax revenues and reforming state institutions. Through this, the country will be able to meet the target of achieving a surplus of 2.3 percent of their gross domestic product (GDP) next year.
He further said that the government is committed to stay within the project framework. The IMF agreed on a package to achieve their priorities and goals. Fourth review will commence after due process.
Sri Lanka's new president Anura Kumara told Dishanaye this week that an interim budget would be presented to parliament in December. He expressed hope to complete the debt restructuring by the end of the year.
During the 2022 financial crisis, Sri Lanka's inflation reached 70 percent due to severe dollar shortages, the value of the currency fell to record lows, and the economy contracted by 7.3 percent. Last year this contraction rate was 2.3 percent. However, the currency has appreciated by 11.3 percent in recent months and inflation has fallen to almost zero. Commodity prices fell by 0.8 percent last month.
According to World Bank forecasts, Sri Lanka's economy is expected to grow by 4.4 percent after three years.
