IMF to Assess Sri Lankan Governance    03/21 06:15

   

   COLOMBO, Sri Lanka (AP) -- The International Monetary Fund said Tuesday it 
is assessing Sri Lanka's governance in the first case of an Asian country 
facing scrutiny for corruption as part of a bailout program.

   The IMF executive board approved a nearly $3 billion bailout plan for the 
bankrupt nation Monday and about $333 million was to be disbursed immediately 
to alleviate the country's humanitarian crisis. The approval also will open up 
financial support from other institutions.

   Sri Lanka suspended repayment of its debt last year as it ran short of 
foreign currency needed to pay for imports of fuel and other essentials. 
Shortages led to street protests that forced out Sri Lanka's president. The 
economic situation has improved under current President Ranil Wickremesinghe, 
but his plans to privatize state companies have raised objections.

   The senior mission chief for the IMF in Sri Lanka said the development 
lender would assess corruption and governance vulnerabilities in Sri Lanka and 
provide recommendations.

   "Sri Lanka will be the first country in Asia to undergo a governance 
diagnostic exercise by the IMF. We look forward to further engagement and 
collaboration with stakeholders and civil society organizations on this 
critical reform area," Peter Breuer told reporters.

   Sri Lankans took to the streets since last year demanding accountability for 
alleged corruption and demanding recovery of assets allegedly stolen by members 
of a former ruling family. Graft has been a main factor behind the country's 
economic meltdown, critics of the government say.

   Sri Lanka's "institutions and governance frameworks require deep reforms," 
IMF Managing Director Kristalina Georgieva said in a statement.

   The IMF's approval means Sri Lanka will no longer be considered a bankrupt 
nation and the country can resume its normal dealings, Wickremesinghe said in a 
brief recorded statement on Tuesday. It also will unlock financing of up to $7 
billion from it and other international financial institutions.

   "As our foreign currency improves, we will gradually lift import 
restrictions. In the first cycle we will bring in essential goods, medicines 
and goods needed for the tourism industry," Wickremesinghe said, adding that he 
expects to present the agreement with the IMF to Parliament after making a 
detailed statement Wednesday.

   Earlier this month, the last hurdle for the approval was cleared when China 
joined Sri Lanka's other creditors in providing assurances for debt 
restructuring.

   Sri Lanka has raised income taxes and removed electricity and fuel 
subsidies, fulfilling prerequisites of the IMF program but also burdening the 
public. Authorities must now discuss with Sri Lanka's creditors how to 
restructure its debt.

   The IMF mission chief, Breuer, said the "impact of the reforms on the poor 
and vulnerable needs to be mitigated."

   "Tax reforms under the program are designed to be progressive, that is, 
ensuring greater contributions from high-income earners. Efforts to increase 
tax revenues should be pursued in a growth-friendly manner while protecting the 
poor and most vulnerable," he said.

   Sri Lanka's foreign reserves ran short as tourism and export revenues dried 
up during the COVID-19 pandemic and it faced heavy debt payments for 
megaprojects funded by Chinese and other international lenders that did not 
generate enough income. It also used its currency reserves to try to stabilize 
the Sri Lankan rupee.

   A Chinese Foreign Ministry spokesman said Beijing saw the agreement with the 
IMF as "good news."

   "We are willing to continue to work with relevant countries and 
international financial institutions to play a positive role in helping Sri 
Lanka cope with the current difficulties, ease the debt burden and achieve 
sustainable development," said the spokesman, Wang Wenbin.

   But he also urged other creditors to join in restructuring Sri Lanka's debt 
and sharing responsibility fairly.

   China owns about 10% of Sri Lanka' s total foreign debt.

   Since Wickremesinghe took over from ousted ex-President Gotobaya Rajapaksa 
shortages have eased and hours-long daily power cuts have ended. The central 
bank says its reserves have improved and the black market no longer controls 
the foreign currency trade.

   However, trade unions oppose Wickremesinghe's plans to privatize state 
companies as part of his reform agenda and public resentment may flare if he 
fails to take action against the Rajapaksa family, who people believe were 
responsible for the economic crisis.

   Wickremesinghe's critics accuse him of shielding the Rajapaksas, who still 
control a majority of lawmakers in Parliament, in return for their support for 
his presidency.