IMF says ready for talks with Sri Lanka’s new leftist government

The controversial $2.9 billion IMF bailout plan for Sri Lanka is ready to be discussed with the nation’s new administration, an IMF spokeswoman said.

As the nation’s first left-leaning president, Anura Kumara Dissanayake was sworn in on Monday. He has stated that he wants to renegotiate the agreement because it contains controversial austerity measures.

“We look forward to working together with President Dissanayake… towards building on the hard-won gains that have helped put Sri Lanka on a path to economic recovery,” an IMF spokesperson in Washington said Monday.

The lender of last resort noted that the South Asian nation, which defaulted on its debt in April 2022, had stabilised since the bailout.

“We will discuss the timing of the third review of the IMF-supported programme with the new administration as soon as practicable,” the spokesperson said referring to the periodic review of the bailout.

A senior aide of the new president told AFP a day after the election that his People’s Liberation Front party will “not tear up” the IMF deal.

“Our plan is to engage with the IMF and introduce certain amendments,” Bimal Ratnayake said.

“We will not tear up the IMF programme. It is a binding document, but there is a provision to renegotiate.”

When Dissanayake took office on Monday, the tiny stock market in Sri Lanka saw a dramatic decline in the first few minutes of trade. However, it swiftly recovered, with the key All Share Price index closing the day 1.19 percent higher.

Dissanayake has promised to lower sales taxes on food and medications in addition to lowering income taxes, which his predecessor Ranil Wickremesinghe had increased.

“We think we can get those reductions into the programme and continue with the four-year bailout programme,” Ratnayake said.

Rivals of Dissanayake had expressed concern that his Marxist party might abandon the IMF program and plunge the nation once more into a chaotic economic situation such to that of 2022.

Due to a foreign exchange crisis, there were shortages of necessities, which sparked protests on the streets and ultimately caused the country’s then-leader, Gotabaya Rajapaksa, to leave.