ECONOMYNEXT – Sri Lanka’s State Finance Minister Shehan Semasinghe has warned of an economic collapse in the event of dissolving the parliament and failure to complete a third review of the International Monetary Fund (IMF) loan.
The island nation has scheduled the presidential election on September 21 and President Ranil Wickremesinghe’s independent coalition has been campaigning on the theme of economic recovery. Under Wickremesinghe, Sri Lanka has seen some economic recovery and stability with IMF-led economic reforms.
Wickremesinghe’s rivals opposition leader Sajith Premadasa and Marxists leader Anura Kumara Dissanayaka have vowed to dissolve the parliament immediately to go for a general election and renegotiate the IMF loan conditions citing the difficulties faced by the general public due to higher taxes.
“President Ranil Wickremesinghe will not dissolve the parliament,” Semasinghe told a public rally in his constituency of Sri Lanka’s North Central district of Anuradhapura.
“This is because we expect to complete the third review of the IMF programme in October. If we act irresponsibly, this country will certainly collapse.”
Under Wickremesinghe, the IMF has already completed the first two reviews and disbursed three tranches of a $3 billion loan.
Opposition parties have shrugged off the warning by Wickremesinghe government on the economy and said they will manage and handle the economy without unilaterally abolishing the IMF deal.
The country is facing a risk of delay in debt restructuring and inflows from multilateral lending agencies like the World Bank and Asian Development Bank if the IMF programme is delayed due to renegotiations.
Government officials have said the country will be deprived of $400 million from the IMF disbursement in December, $400 million from the World Bank project loans in January 2025, and a $500 million project loans in February 2025 if the country attempts to deviate from an IMF Debt Sustainability Analysis (DSA).
The DSA is based on five key targets including debt-to-GDP, foreign loan repayments, and total government borrowing to make Sri Lanka’s debts sustainable. (Colombo/September 10/2024)