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Austerity will bring political challenges in Sri Lanka

Wednesday, December 14, 2022


The government’s commitment to fiscal consolidation is aimed at pleasing the IMF, with which Sri Lanka recently reached a staff-level agreement on a four-year, USD2.9bn bailout. Colombo awaits approval of the deal by the Fund’s Executive Board.


  • Sri Lanka is unlikely to receive the first tranche of IMF bailout funds this year but should do so within the first quarter of 2023.
  • Using force to break up protests could unleash a cycle of violence, hurting government attempts to convey an image of political stability.
  • The government will have to contend with shortfalls in revenue if the budget’s assumptions are not borne out.

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