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IMF to Assess Sri Lankan Governance 03/21 06:15
COLOMBO, Sri Lanka (AP) -- The International Monetary Fund said Tuesday it
is assessing Sri Lanka's governance in the first case of an Asian country
facing scrutiny for corruption as part of a bailout program.
The IMF executive board approved a nearly $3 billion bailout plan for the
bankrupt nation Monday and about $333 million was to be disbursed immediately
to alleviate the country's humanitarian crisis. The approval also will open up
financial support from other institutions.
Sri Lanka suspended repayment of its debt last year as it ran short of
foreign currency needed to pay for imports of fuel and other essentials.
Shortages led to street protests that forced out Sri Lanka's president. The
economic situation has improved under current President Ranil Wickremesinghe,
but his plans to privatize state companies have raised objections.
The senior mission chief for the IMF in Sri Lanka said the development
lender would assess corruption and governance vulnerabilities in Sri Lanka and
provide recommendations.
"Sri Lanka will be the first country in Asia to undergo a governance
diagnostic exercise by the IMF. We look forward to further engagement and
collaboration with stakeholders and civil society organizations on this
critical reform area," Peter Breuer told reporters.
Sri Lankans took to the streets since last year demanding accountability for
alleged corruption and demanding recovery of assets allegedly stolen by members
of a former ruling family. Graft has been a main factor behind the country's
economic meltdown, critics of the government say.
Sri Lanka's "institutions and governance frameworks require deep reforms,"
IMF Managing Director Kristalina Georgieva said in a statement.
The IMF's approval means Sri Lanka will no longer be considered a bankrupt
nation and the country can resume its normal dealings, Wickremesinghe said in a
brief recorded statement on Tuesday. It also will unlock financing of up to $7
billion from it and other international financial institutions.
"As our foreign currency improves, we will gradually lift import
restrictions. In the first cycle we will bring in essential goods, medicines
and goods needed for the tourism industry," Wickremesinghe said, adding that he
expects to present the agreement with the IMF to Parliament after making a
detailed statement Wednesday.
Earlier this month, the last hurdle for the approval was cleared when China
joined Sri Lanka's other creditors in providing assurances for debt
restructuring.
Sri Lanka has raised income taxes and removed electricity and fuel
subsidies, fulfilling prerequisites of the IMF program but also burdening the
public. Authorities must now discuss with Sri Lanka's creditors how to
restructure its debt.
The IMF mission chief, Breuer, said the "impact of the reforms on the poor
and vulnerable needs to be mitigated."
"Tax reforms under the program are designed to be progressive, that is,
ensuring greater contributions from high-income earners. Efforts to increase
tax revenues should be pursued in a growth-friendly manner while protecting the
poor and most vulnerable," he said.
Sri Lanka's foreign reserves ran short as tourism and export revenues dried
up during the COVID-19 pandemic and it faced heavy debt payments for
megaprojects funded by Chinese and other international lenders that did not
generate enough income. It also used its currency reserves to try to stabilize
the Sri Lankan rupee.
A Chinese Foreign Ministry spokesman said Beijing saw the agreement with the
IMF as "good news."
"We are willing to continue to work with relevant countries and
international financial institutions to play a positive role in helping Sri
Lanka cope with the current difficulties, ease the debt burden and achieve
sustainable development," said the spokesman, Wang Wenbin.
But he also urged other creditors to join in restructuring Sri Lanka's debt
and sharing responsibility fairly.
China owns about 10% of Sri Lanka' s total foreign debt.
Since Wickremesinghe took over from ousted ex-President Gotobaya Rajapaksa
shortages have eased and hours-long daily power cuts have ended. The central
bank says its reserves have improved and the black market no longer controls
the foreign currency trade.
However, trade unions oppose Wickremesinghe's plans to privatize state
companies as part of his reform agenda and public resentment may flare if he
fails to take action against the Rajapaksa family, who people believe were
responsible for the economic crisis.
Wickremesinghe's critics accuse him of shielding the Rajapaksas, who still
control a majority of lawmakers in Parliament, in return for their support for
his presidency.
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