IMF team overseeing Sri Lanka's bailout programme visits Jaffna first time

Colombo: A team of senior IMF officials overseeing Sri Lanka's bailout programme has toured the Tamil-dominated Northern district of Jaffna for the first time under the current $2.9 billion agreement, officials said here on Monday.

Led by Peter Brueur, the International Monetary Fund senior mission chief for Sri Lanka, the team last week met with the Governor of the Northern province, PMS Charles, and other senior officials and discussed issues related to economic growth in the province, demining programmes, resettlement of conflict-displaced individuals and compensation for conflict victims.

They also discussed the educational matters related to Jaffna University, post-Covid operations, and the adverse effects of climate change on the northern region, the officials said.

The team, which returned to Colombo on Monday, is scheduled to engage with the finance ministry. Talks are expected with Shehan Semasinghe, the state minister of finance, who leads the local IMF engagement under President Ranil Wickremesinghe.

The discussions in Colombo are anticipated to focus on the targets outlined in the current IMF programme, which advocates large scale economic reforms in the island nation.

In a meeting with President Wickremesinghe on Thursday last, Brueur had expressed satisfaction with Sri Lanka's progress in implementing reforms aimed at revitalising the economy.

The global lender had commended Sri Lanka for its advancements in policy-oriented variables and fiscal consolidation.

Sri Lanka, which declared its first-ever debt default in April 2022, had secured an IMF bailout agreement of $2.9 billion over four years by the last quarter of 2022.

The first tranche of $1.5 billion was released in March 2023, with the second installment of $337 million arriving in December 2023 following the first review.

However, the reforms tied to the bailout programme, such as high personal taxes, increased utility rates, and VAT, have caused political challenges for President Wickremesinghe.

As Wickremesinghe faces a presidential election scheduled after September this year, navigating these economic reforms will be a crucial aspect of his political agenda.

Notably, Finance Minister Nirmala Sitharaman in November last year visited Jaffna where she inaugurated a branch of the State Bank of India (SBI).