COLOMBO: Sri Lanka’s painful austerity measures were “bearing fruit” and must be sustained, the International Monetary Fund said on Friday (Oct 4) as the country’s new president sought changes to its US$2.9 billion bailout.
Leftist leader Anura Kumara Dissanayake won last month’s presidential election promising to reverse steep tax hikes, raise public servant salaries and renegotiate an unpopular IMF bailout secured by Colombo last year.
But analysts say Dissanayake has little room to reshape the terms of the IMF deal.
The avowed Marxist held talks with IMF representatives for a second straight day on Friday, his office said in a statement.
“President Dissanayake aims to achieve the objectives of the program in partnership with the IMF, seeking alternative approaches that will alleviate the burden on the citizens,” it said.
In his first meeting with the IMF delegation on Thursday, Dissanayake said he wanted to reduce the tax burden on lower-income households.
In response, the Washington-based lender stressed that it was important not to jeopardise Sri Lanka’s hard-won economic recovery.
“Reform efforts are bearing fruit in terms of reviving economic growth, lowering inflation, boosting reserves and improving revenue mobilisation,” spokesperson Julie Kozack said in Washington.
“Important vulnerabilities and uncertainties do remain, and this means that sustaining reform momentum is critical.”
IMF Asia Pacific Director Krishna Srinivasan called the talks “productive” and focused on maintaining “hard-won gains”.
Sri Lanka can draw down a fourth tranche of US$336 million only if the lender is satisfied that leaders are sticking to the rescue plan’s revenue and spending targets.
