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IMF’s US$2.9 billion bailout an ‘endorsement’ for Sri Lanka’s economic recovery: analysts

  • Sri Lanka has been waiting since September for the IMF loan, as the broke country seeks a desperate path to recovery
  • People have been struggling to make ends meet and afford basic supplies, with sharp increases in electricity charges and income taxes taking a toll

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A vendor waits for customers at his vegetable stall at a main market in Colombo, Sri Lanka, in February 2023. Photo: Reuters

The long-awaited IMF financing will not “drastically change the trajectory of things” for Sri Lankans struggling with rising costs of living, but it could provide a much-needed confidence boost that the country’s economic recovery is on the right track, experts have said.

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The International Monetary Fund (IMF) is expected to give final approval later this month for its US$2.9 billion, four-year bailout package after Sri Lanka had secured financing assurances from China, India and all its major bilateral creditors.

“IMF money itself will not drastically change the trajectory of things. But, what is more important is the overall improvement of the sentiment and the confidence built about the programme,” said Chayu Damsinghe, product head of macroeconomic and thematic research at Frontier Research, a Sri Lanka-based macro advisory firm.

Approval would also help release the billions of dollars in bilateral aid and loans that could trigger processes to initiate gradual recovery, even if it did not offer direct help out of the crisis, Damsinghe added.

The sentiment was echoed by government spokesman Bandula Gunawardana, who said: “Our problems can’t be solved with this US$2.9 billion, but what is really important for us is the endorsement of the IMF that our economy is now on the right path.”

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