IMF approves USD 3 billion in financial assistance for Sri Lanka

The International Monetary Fund on Monday approved USD 3 billion in financial assistance to debt-ridden Sri Lanka to help it immediately overcome its economic crisis.

IMF's Executive Board approved on Monday a 48-month extended arrangement under its Extended Fund Facility (EFF) with an amount of SDR 2.286 billion (395 per cent of quota or about USD 3 billion), according to a statement.

Special Drawing Rights (SDR) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF).

Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis. The economy is facing significant challenges stemming from pre-existing vulnerabilities and policy missteps in the lead up to the crisis, further aggravated by a series of external shocks, the IMF said.

The EFF-supported programme aims to restore Sri Lanka's macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, safeguard financial sector stability, and strengthen governance and growth potential, said the media statement.

The Executive Board's decision will enable an immediate disbursement equivalent to SDR 254 million (about USD 333 million) and catalyse financial support from other development partners, it said.

Sri Lanka in April declared its first-ever debt default in its history as the economic crisis since independence from Britain in 1948 triggered by forex shortages sparked public protests.

Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support.

Sri Lanka has introduced painful economic measures such as tax hikes and utility rate hikes. Trade unions and opposition groups have organised protests against such measures.