COLOMBO: Sri Lanka, which is currently facing an economic crisis, is waiting for International Monetary Fund (IMF) to formally approve $2.9 billion bailout package before the year-end.
The officials of the International Monetary Fund and the Sri Lankan authorities on September 1 reached a staff-level agreement to support the economic policies of the island nation with a 48-month arrangement under the Extended Fund Facility of about USD 2.9 million, The Daily Mirror reported.
The IMF said that debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be needed for debt sustainability and closing financing gaps. It further stated that the financial assurance to restore debt sustainability from Sri Lanka’s official creditors and making an effort for collaborative agreement with private creditors is important before the IMF can give financial assistance to the island nation. Notably, the main creditors of Sri Lanka include Japan, China and India.
According to Sri Lanka’s local media outlet The Daily Mirror, the economic crisis in the island nation was caused by “several years of mismanagement, corruption, shortsighted policymaking, and an overall lack of good governance.”
Insufficient foreign reserves at Sri Lanka’s central bank and loss of access to international capital markets led to the country defaulting on debt for the first time in history. In addition, unchecked external borrowings, tax cuts that increased the budget deficit, a restriction on the import of chemical fertiliser and the abrupt floating of the Sri Lankan rupee are a few of the elements that caused the economy to collapse.
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