Sri Lanka budget to bolster revenue and fight inflation as IMF talks progress

Sri Lanka's talks with the International Monetary Fund (IMF) on a bailout package have made solid progress, President Ranil Wickremesinghe said on Tuesday, presenting an interim budget to boost revenue and fight inflation.

The island nation of 22 million people is battling its worst economic crisis since its independence from Britain in 1948. Wickremesinghe, who took over as the country's President last month, is pushing to bring in fiscal consolidation measures agreed with the IMF.

Negotiations with the IMF, which currently has a team of officials visiting Sri Lanka, have reached a "successful level", he said.

"We hope to start talks with creditors," said Wickremesinghe — who also serves as finance minister — to the parliament, as he presented his first budget since taking over as leader.

Officials hope the interim budget for the rest of the year will be followed by a preliminary, staff-level agreement with the IMF, for a loan package worth between $2 billion and $3 billion.

Covid-19 battered the island's tourism-reliant economy and slashed remittances from workers overseas. The damage was compounded by rising oil prices, populist tax cuts, and a seven-month ban on importing chemical fertilisers last year, that devastated agriculture.

The result has been chronic shortages of basic goods, runaway inflation and mass protests that forced the then-president Gotabaya Rajapaksa to flee the country, leaving his successor, Wickremesinghe, to handle the restructuring of billions of dollars in debt to China and other countries.

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