COLOMBO: The Inter­national Monetary Fund approved the third review of Sri Lanka’s $2.9 billion bailout on Saturday but warned that the South Asian economy remains vulnerable.

In a statement, the IMF said it would release about $333m, bringing total funding to around $1.3bn, to the crisis-hit nation. It said signs of an economic recovery were emerging.

The country still needs to complete a $12.5bn bon­dholder debt restructuring and a $10bn debt rew­­­ork with bilateral creditors including Japan, China and India to take the programme forward, the IMF said.

The IMF bailout secured in March last year helped stabilise economic conditions after cash-stra­pped Sri Lanka plunged into its worst financial crisis in more than seven decades in 2022.

Staying in line with tax revenue requirements and continuing reforms of state-owned enterprises will remain crucial to hitting a primary surplus target of 2.3pc of gross dom­estic product next year, said IMF Senior Mission Chief Peter Breuer, wrapping up a delegation visit to the capital Colombo.

“The authorities have committed to staying within the guardrails of the programme,” Breuer said. “We have agreed on a package for them to achieve their priorities and objectives and as soon as that is submitted to parliament it will then be possible to go ahead with the fourth review process.”

During Sri Lanka’s crisis, a severe dollar shortage sent inflation soaring to 70pc, its currency to record lows and its economy contracting by 7.3pc during the worst of the fallout and by 2.3pc last year.

In recent months, the rupee has risen 11.3pc and inflation disappeared, with prices falling 0.8pc last month.

Published in Dawn, November 24th, 2024