Sri Lanka President Plans to Start IMF Talks, Focus on Stability
(Bloomberg) -- Sri Lanka’s new president Anura Kumara Dissanayake said he plans to start discussions with the International Monetary Fund as part of his focus on establishing stability in the island nation before rolling out other initiatives.
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“There are many plans that we want to put in place. But before that we have to achieve stability,” Dissanayake said in Sinhalese in an address to the nation on Wednesday — his first since assuming office. “We will, therefore, start talks with the IMF and push forward the matters related to Extended Fund Facility.”
Dissanayake, 55, a leftist political outsider, had vowed to reopen negotiations with the multilateral lender over its $3 billion bailout. Some of Dissanayake’s backers oppose the existing debt restructuring framework. He won the presidential election on Sept. 21 in a stunning rebuke of Sri Lanka’s political elite, who voters blamed for bankrupting the nation and imposing harsh austerity measures linked to an International Monetary Fund bailout.
“We will start a discussion with creditors and wrap up debt restructuring and get the concessions,” he said on Wednesday, without sharing more details.
Dissanayake dissolved the nation’s parliament starting from Wednesday and called for early elections to be held on Nov. 14. Holding parliamentary elections so soon is seen as a bid to bolster Dissanayake’s numbers in the legislature and push through policies tied to campaign promises.
Under the constitution, Sri Lanka was due to hold parliamentary elections by the middle of 2025. The nation’s executive system gives the president power to dissolve the legislature and call snap polls, as well as to hold multiple cabinet portfolios.
On Tuesday, Dissanayake chose Harini Amarasuriya from his coalition as the nation’s new prime minister and appointed a three-member cabinet, which includes himself and others from his party.
Dissanayake leads the National People’s Power, a coalition of leftist political parties and groups backed by protesters responsible for ousting President Gotabaya Rajapaksa in 2022. The NPP had just three parliamentarians in Sri Lanka’s now-dissolved 225-seat legislature.
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Reviewing the debt plan or reopening IMF talks risk delaying the disbursement of fresh loans from the Washington-based lender. The IMF this week said it will discuss the timing of the third review of the nation’s loan program with the new administration “as soon as practicable.”
Under the current bailout program, Sri Lanka will need to meet certain economic targets before the IMF approves the next tranche of funding, estimated at about $350 million.
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Dissanayake has also said he may cancel a proposed wind power project by India’s Adani Group amid claims of a lack of transparency and uncompetitive pricing.
The new president faces the challenge of juggling the competing interests of China and India, strategic rivals who’ve been major investors.
Some analysts believe Dissanayake is more likely to favor China given his party’s Marxist roots, although he also paid a visit to New Delhi at the invitation of India’s government earlier this year.
Dissanayake’s backers have also called for greater scrutiny of investment deals with China and other nations to avoid future debt traps. He’s previously questioned the government’s trade agreement with China, saying it would undermine Sri Lankan businesses.
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