Sri Lanka’s new president faces harsh reality in meeting with IMF

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IMF cautions Sri Lanka against populist measures

By Raisina Correspondent

New Delhi, October 4: The International Monetary Fund (IMF) delegation on Friday held extensive discussion with the newly-elected Sri Lankan President Anura Kumara Dissanayake. The IMF counselled Dissanayake to stay on fiscal prudence path and now squander away gains made from harsh discipline in last one year.

“Today, I participated in the second round of discussions with the IMF at the Presidential Secretariat. During the meeting, both sides discussed the next steps regarding the third review of the program with the IMF, as well as the necessary actions to avoid any potential delays,” said Dissanayake in a post on X.

Dissanayake recently won the presidential election. His predecessor Ranil Vickremesinghe came fourth in the presidential race.

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Marxist Dissanayake had run his election campaign on twin planks of high taxation and corruption in the high offices. Now, Dissanayake finds little embow room to cut taxes as IMF conditions seek full compliance to the norms to avail further cooperation in the financial assistance programme.

“Our goal is to meet the targets set under the IMF program while being mindful of the pressure on the public and exploring alternative approaches that can alleviate the burden on the people. A constructive and cooperative environment was successfully established during these talks, which concluded today after three days of discussions,” added Dissanayake.

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Senior IMF representatives, including Krishna Srinivasan, Director of the Asia Pacific Department, and Dr. Peter Breuer, Chief of the IMF delegation, along with other senior officials, participated in the meeting alongside the Sri Lankan delegation.

The IMF has said that the austerity measures followed by Dissanayake’s predecessor are “bearing fruits”. The IMF said that Sri Lanka should pursue fiscal prudence to full recover.

The IMF had last year approved the $2.9 billion bailout package for the island nation. Earlier, India had extended almost $4 billion of grants to Sri Lanka to stabilise its economy.

Dissanayake told the IMF officials that he seeks to reduce the tax burden on lower-income households. This was his main campaign plank. He has dissolved the Sri Lankan parliament to pave way for fresh elections.

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The IMF has told Dissanayake that he shouldn’t do anything that may derail the recovery path of the Sri Lankan economy. Sri Lanka in 2022 had announced a sovereign default.

The popular uprising had forced then president Gotabaya Rajapaksa to flee Sri Lanka. Wickremesinghe had stepped in as the president to stabilise the Sri Lankan economy.

Dissanayake will be visiting New Delhi for his first foreign bilateral visit after winning the elections. He met India’s External Affairs Minister Subrahmanyam Jaishankar in Colombo on Friday.

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