Report: Sri Lanka, IMF Reach Preliminary Loan Pact
Sri Lanka and the International Monetary Fund (IMF) have reportedly reached a preliminary agreement on an emergency loan to the island nation, which currently faces its worst economic crisis since its independence in 1948.
Facts
- Sri Lanka and the International Monetary Fund (IMF) have reportedly reached a preliminary agreement on an emergency loan to the island nation, which currently faces its worst economic crisis since its independence in 1948.
- A formal announcement is expected to be made on Thurs. as the IMF's second mission to Colombo in three months - which was scheduled to conclude on Wed.- was extended by a day.
- This comes a day after Sri Lanka's Pres. Ranil Wickremesinghe announced reforms and tax hikes to reverse its economic breakdown.
- Wickremesinghe also stated that the country will adopt a new Central Bank law to curb political interference and prevent money printing.
- Colombo expects to reach a deal with the IMF for a four-year program in which it would receive up to $3B from the financial institution, while it wraps up a plan to reorganize foreign debt, including around $12B to bondholders.
- According to the UN, around 5M Sri Lankans are currently fighting to access food as the nation was hit hard by COVID, economic mismanagement, and raging inflation.
Sources: CNBC, Economic Times, Bloomberg, Morning, News, and Al Jazeera.
Narratives
- Establishment-critical narrative, as provided by War on Want. While this sounds like good news, this move won't actually solve the country's debt crisis. On the contrary, it will only further confine Sri Lanka to a vicious foreign debt circle that it has been trapped in for decades, with international financial institutions meddling in domestic affairs. If the intention is to help them handle this crisis, Sri Lanka's debt should be forgiven.
- Pro-establishment narrative, as provided by Financial Times. The IMF has long been accused of creating vicious debt circles and interfering in domestic affairs, but these claims aren't accurate and those making them offer no viable alternative for countries in economic crisis. Sri Lanka is right to deal with the IMF as its assistance will be helpful to tackle the current crisis and to create a long-lasting positive macroeconomic environment.
