Sri Lanka's Debt Sustainability: IMF Program at Risk

Colombo, Sep 6 (PTI) Any attempt to revisit Sri Lanka's debt sustainability assessment (DSA) can derail the ongoing IMF programme bailout, the finance ministry said on Friday.

“Any country can of course stand its ground and refuse to move forward based on the IMF's DSA if it disagrees with the outcomes of the model and the IMF's assessment," the Ministry of Finance said in a statement titled “Clarifications on Debt Restructuring and the Debt Sustainability Analysis”.

It added that a standoff in such a scenario would only delay an agreement on a financing programme for several months if not years.

The statement highlighted that the International Monetary Fund (IMF) cannot proceed with a financing programme if a country's debt is deemed unsustainable.

The statement comes as Marxist Janatha Vimukthi Peramuna (JVP) front National People's Power (NPP) in its manifesto for the September 21 presidential election said last week that it would work for an alternative debt sustainability analysis and the Washington-based global lender's condition of revenue-based fiscal consolidation.

The finance ministry statement asserted that Sri Lanka's agreement with creditors for sovereign debt restructuring needed IMF endorsement “to confirm as the independent actor that the negotiated terms indeed provide the required debt relief to comply with the debt targets”.

The ministry's warning on DSA aligns with incumbent president Ranil Wickremesinghe's narrative that the current bail-out programme requirements must persist for Sri Lanka to achieve complete recovery.

The opposition parties have heavily criticised Wickremesinghe's steer of the economy since the island nation declared its bankruptcy in April 2022, announcing its first-ever sovereign default.

Wickremesinghe was able to revive the negative growth of six successive quarters with the help of international partners of recovery.

However, his reforms at the behest of the IMF, which sent the cost of utilities high, have made him unpopular.

Anura Kumara Dissanayake, the NPP candidate, believes he leads in the unofficial polls to win the election over Wickremesinghe and the main opposition challenger Sajith Premadasa.

The two main contenders, however, did not directly pledge to reverse them.