Sri Lanka and IMF Reach Preliminary Agreement for $2.9 Billion Loan
Posted on 09/01/2022
The International Monetary Fund (IMF) says it has reached a preliminary agreement to provide US$ 2.9 billion over four years to help crisis-hit Sri Lanka. The IMF seeks to extend a 48-month arrangement under Extended Fund Facility (EFF) of about US$ 2.9 billion to Sri Lanka. In return, the IMF expects the Sri Lankan government to reduce its fiscal deficits. To reduce government expenses, the Sri Lankan government increased the price of electricity and fuel. Electricity and fuel were heavily subsidized by the government.
Sri Lanka owes US$ 51 billion in foreign debt, of which US$ 28 billion is to be paid by 2027. Japan, China, and India, are major creditor nations to Sri Lanka. Sri Lanka defaulted on its debt repayment for the first time in May 2022. In recent times, the people of Sri Lanka faced fuel shortages, medicine shortages, and a lack of basic goods. The island nation was in political turmoil and inflation soared across the country being nearly 65% year-on-year. The crippling economic crisis toppled Sri Lanka’s President Gotabaya Rajapaksa in July 2022 as he left the country as citizens stormed the capital and his residences. Rajapaksa’s family had dominated Sri Lankan politics for much of the past two decades.
Sri Lanka declared independence from England in 1948.
