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IMF approves Sri Lanka’s much-awaited bailout package

Sri Lanka's request for a $2.9 billion bailout has been approved by the International Monetary Fund (IMF) on March 20.

IMF approves

Context: –  Sri Lanka’s request for a $2.9 billion bailout has been approved by the International Monetary Fund (IMF) on March 20.

An overview of the news

  • The package of special drawing rights of about $3 billion will be available over 4 years.
  • The Executive Board’s decision will enable immediate disbursement of $333 million.
  • With the approval of the much-awaited bailout, Sri Lanka will restore macroeconomic stability and debt sustainability while carrying forward structural reforms.
  • Stabilizing Sri Lanka’s economy and achieving sustainable debt levels has been a priority since Ranil Wickremesinghe took office last July.
  • The IMF facility will enable Sri Lanka to access finance from the markets and other lending institutions such as the ADB and the World Bank.
  • Sri Lanka was hit by an unprecedented financial crisis in 2022 due to a severe shortage of foreign exchange reserves, the worst since its independence from Britain in 1948.

Aim of bailout package

  • To boost government revenue, 
  • Encourage fiscal consolidation, 
  • Introduce new pricing for fuel and electricity, 
  • Hike social spending, 
  • Bolster central bank autonomy, 
  • Rebuild depleted foreign reserves
  • To reach a primary surplus of 2.3% of GDP by 2024.

About International Monetary Fund (IMF) 

  • It is an international organization that promotes global economic growth and financial stability, encourages international trade, and reduces poverty.
  • It was established in 1944 in the aftermath of the Great Depression of the 1930s.
  • It is an organization of 190 member countries.
  • It is governed by and accountable to 190 countries.
  • India became its member in December 1945.
  • The IMF’s resources come mainly from money that countries pay in as their capital subscriptions (quotas) when they become members.
  • The International Monetary Fund’s executive board comprises 24 members.
  • Managing Director – Kristalina Georgieva (Bulgaria)
  • Headquarter (HQ) – Washington, D.C., US

IMF approves

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