The IMF approves a $3 billion loan for Sri Lanka

The International Monetary Fund (IMF) has agreed to provide Sri Lanka with a $3 billion loan as it navigates its biggest economic crisis since achieving independence.

The agreement, which has been in development for about a year, is a lifeline for the nation, which has billions of dollars in loans.

The government will raise money, according to foreign minister Ali Sabry, by reforming state-owned businesses and privatizing the national airline.

Analysts cautioned that Sri Lanka still has a difficult path ahead of it.

The epidemic, rising energy costs, populist tax cuts, and more than 50% inflation have all had a negative impact on the economy of the nation.

The cost of living reached record highs as a result of a shortage of gasoline, medications, and other necessities, which also contributed to the uprisings that led to the overthrow of the government in 2022 on a national scale. As a result, the nation had its first-ever failure on its debts to foreign lenders in May.

The IMF claimed earlier this month that Sri Lanka had obtained funding guarantees from all of its significant creditors, including China and India, clearing the path for the bailout.

Whether China, Sri Lanka’s largest bilateral lender, would think about cancelling part of the country’s loans was a little early, according to Mr. Sabry.

“We want to pay, but we lack the resources to do so.” “Currently, we are attempting to regain that capacity,” he stated.

Initially, the Sri Lankan government intended to reach an agreement on a new payment schedule with China and India by the end of 2022.

Beijing has lent Sri Lanka over $7 billion (£5.71 billion), while India is owing approximately $1 billion (£820 million).