COLOMBO (Reuters) – The International Monetary Fund (IMF) approved the third review of Sri Lanka’s $2.9 billion bailout on Friday, strengthening the South Asian economy’s rebound from a financial crisis.
In a statement, the global lender said it would release about $334 million to the crisis-hit nation, bringing total funding to around $1.3 billion.
The executive board’s decision comes after Sri Lanka’s new president Anura Kumara Dissanayake rolled out his first full-year budget, which included committing to a primary surplus target of 2.3% of GDP for 2025 set under the IMF program.
Sri Lanka also completed a $25 billion debt rework with bondholders and key bilateral creditors last year, which was another major IMF requirement.
“Program performance has been strong with all quantitative targets met, except for the indicative target on social spending. Most structural benchmarks due by end-January 2025 were either met or implemented with delay”, Kenji Okamura, Deputy Managing Director of the IMF said in the statement.
The IMF bailout secured in March 2023 helped stabilise economic conditions after dollar-strapped Sri Lanka plunged into its worst financial crisis in more than seven decades in 2022.
The economic freefall sent inflation soaring to 70%, its currency to record lows and its economy contracting by 7.3% during the worst of the fallout and by 2.3% in 2023.
But the island nation is expected to grow by 5% this year, Dissanayake said in his budget speech to parliament while inflation has disappeared and the rupee’s depreciation had slowed to 1.3% against the dollar.
(Reporting by Uditha Jayasinghe, Editing by Louise Heavens)
