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.