IMF staff level agreement expected on Friday to release bailout funds

Sri Lanka expects the IMF to announce a staff-level agreement on its third review of the country’s bailout program on Friday, President Anura Kumara Dissanayake told the first sitting of the new parliament.

Once the IMF executive board approves, a further tranche of about $337 million in funds will be released to Sri Lanka.

Dissanayake’s National People’s Power (NPP) coalition won a record 159 seats in the 225-member parliament in a general election last week.

A delegation from the International Monetary Fund is in Colombo for the third review of its $2.9 billion program.

The IMF said later at a press briefing in Washington that the team in Colombo was expected to wrap up the mission and hold a press conference on Nov. 23 without giving details about any findings.

Dissanayake also outlined plans to complete a $12.5 billion debt restructuring with bondholders in December.

He added that Sri Lanka will enter into individual agreements with bilateral creditors, including Japan, China, and India, needed to complete a $10 billion debt restructuring.

“Our economy is hanging by a thread. This economy cannot absorb any shocks. We have to think deeply and in detail about our policy decisions. The moment we obtained power, we prioritized building confidence and reassuring stakeholders,” he told lawmakers.

“We need to do much more to put the economy on a stable path.”

A nation of 22 million, Sri Lanka was crushed by a 2022 economic crisis triggered by a severe shortage of foreign currency that pushed it into a sovereign default and caused its economy to shrink by 7.3% in 2022 and 2.3% last year.

The president will have to present an interim budget in the next few weeks and find ways to reduce taxes and increase welfare, which was his key election pledges, without derailing the IMF program.

According to World Bank data, Sri Lanka’s economic output is expected to grow 4.4% in 2024.