Add Category
His government increased income taxes sharply and removed electricity and fuel subsidies, fulfilling prerequisites of the IMF program, but the changes were met with protests at home.
Authorities must now discuss with its creditors on how to restructure its debt.
Workers representing government institutions participate in a protest against Sri Lankan President Ranil Wickremesinghe’s tax policy in Colombo in February.Credit:AP
“Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported program,” Georgieva said.
“The authorities’ commitments to transparently achieve a debt resolution, consistent with the program parameters and equitable burden sharing among creditors in a timely fashion, are welcome,” she said.
Sri Lanka last year suspended repayment of its foreign debt amid a severe foreign currency crisis, because of a fall in tourism and export revenue due to the COVID-19 pandemic, megaprojects funded by Chinese loans that did not generate income, and releasing foreign currency reserves to hold the exchange rates for a longer period.
Loading
The currency crisis created severe shortages of some foods, fuel, medicine and cooking gas, leading to angry street protests that forced then-president Gotabaya Rajapaksa to flee the country and resign. Protesters even invaded the presidential palace, taking up residence and swimming in the pool.
Since Wickremesinghe took over, he has managed to reduce shortages and ended hours-long daily power cuts. The Central Bank says its reserves have improved and the black market no longer controls the foreign currency trade.
However, Wickremesinghe’ s government is likely to face hostility from trade unions over his plans to privatise state ventures as part of his reform agenda and public resentment may increase if he fails to act against the Rajapaksa family, who people believe were responsible for the economic crisis.
Wickremesinghe’s critics accuse him of shielding the Rajapaksa family, who still control a majority of MPs in parliament, in return for their support for his presidency.
AP