Sri Lanka’s new president took office with a mandate to bring relief to citizens still burdened by the remnants of the country’s worst-ever economic crisis. Now comes the hard part: Getting the lenders to play along.
Anura Kumara Dissanayake has vowed to reopen negotiations with the International Monetary Fund over a $3 billion bailout to ease the burden on the poor following government spending cuts and tax hikes tied to the loan. Investors are worried that drawn out negotiations could delay payments or even threaten the loan program itself. Also uncertain now are separate deals with Sri Lanka’s bondholders and creditor countries to restructure about $20 billion in debt after the nation defaulted for the first time ever in 2022.
But the new president may find it a challenge to alter anything but the fine print of the deals already in place, according to analysts, creditors and a former IMF official, given legislation locking in certain benchmarks set by the lending deal, and an eleventh-hour debt restructuring agreement between the previous government and the country’s private creditors.
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