According to Reuters, the International Monetary Fund (IMF) granted Sri Lanka a $2.9 billion loan on Thursday. Widespread protests earlier this year in the island nation—which is currently experiencing its worst economic crisis since gaining independence in 1948—led to Gotabaya Rajapaksa’s resignation as president and the election of Ranil Wickremesinghe.

President Wickremesinghe unveiled his maiden budget on Tuesday to increase income and reduce inflation. He also serves as the nation’s Finance Minister. The executive board and management of the IMF must ratify the preliminary agreement between Sri Lanka and the IMF. Additionally, it will only be implemented if Sri Lankan authorities take the previously agreed-upon steps.

Reuters quoted senior IMF official Peter Breuer noting that the staff level deal is just the start of a long journey for Sri Lanka. The reform process has already started but must be pushed forward resolutely.

IMF funds mean for Sri Lanka

The money will be distributed over four years to aid economic growth and stabilization. The package, according to a report by Reuters, will increase government revenue to support fiscal consolidation. Further, it will implement new fuel and electricity pricing, increase social spending, support central bank autonomy, and replenish depleted foreign reserves.

The important thing in this circumstance, according to High Commissioner Moragoda at Idea Exchange, is that the agreement inspires trust even though the loan amount is not big given Sri Lanka’s current predicament. It inspires confidence in the arrival of investors, the potential increase of our remittances, which have decreased by 50%, and the appearance of additional bilateral relationships.

The High Commissioner claimed that despite not knowing the direction the crisis would take, India had supported Sri Lanka. This is why we are so appreciative. India was the only country that stepped up without us having any program. Therefore India urged us to go to the IMF. Now we are hopeful that others will join.

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