IMF approves Sri Lanka’s much-awaited bailout package

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IMF approves Sri Lanka’s much-awaited bailout package

Sri Lanka's request for a $2.9 billion bailout has been approved by the International Monetary Fund (IMF) on March 20.

An overview of the news

  • The package of special drawing rights of about $3 billion will be available over 4 years.

  • The Executive Board's decision will enable immediate disbursement of $333 million.

  • With the approval of the much awaited bailout, Sri Lanka will restore macroeconomic stability and debt sustainability while carrying forward structural reforms.

  • Stabilizing Sri Lanka's economy and achieving sustainable debt levels has been a priority since Ranil Wickremesinghe took office last July.

  • The IMF facility will enable Sri Lanka to access finance from the markets and other lending institutions such as the ADB and the World Bank.

  • Sri Lanka was hit by an unprecedented financial crisis in 2022 due to a severe shortage of foreign exchange reserves, the worst since its independence from Britain in 1948.

Aim of bailout package

  • To boost government revenue, 

  • Encourage fiscal consolidation, 

  • Introduce new pricing for fuel and electricity, 

  • Hike social spending, 

  • Bolster central bank autonomy, 

  • Rebuild depleted foreign reserves

  • To reach a primary surplus of 2.3% of GDP by 2024.

About International Monetary Fund (IMF) 

  • It is an international organization that promotes global economic growth and financial stability, encourages international trade, and reduces poverty.

  • It was established in 1944 in the aftermath of the Great Depression of the 1930s.

  • It is an organization of 190 member countries.

  • It is governed by and accountable to 190 countries.

  • India became its member in December 1945.

  • The IMF's resources come mainly from money that countries pay in as their capital subscriptions (quotas) when they become members.

  • The International Monetary Fund’s executive board comprises 24 members.

  • Managing Director - Kristalina Georgieva (Bulgaria)

  • Headquarter (HQ) - Washington, D.C., US

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