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Sri Lanka: IMF Talks to Restart In August

Facts

  • On Wed., Sri Lanka's recently elected Pres. Ranil Wickremesinghe said bailout talks with the International Monetary Fund (IMF) will restart this month as he urged lawmakers to form a national unity government to address the nation's economic crisis.
  • Colombo expects to reach a deal with the IMF for a four-year program in which it would receive up to $3B from the financial institution, while it wraps up a plan to reorganize foreign debt, including around $12B to bondholders.
  • Wickremesinghe, who was PM until July, stated that political turmoil, including the resignation of former Pres. Rajapaksa, delayed negotiations with the fund.

Sources

Spin

Anti-China narrative

Sri Lanka's crisis is a product of Chinese foreign policy, specifically its practice of "debt-trap diplomacy." China offers to build sparkling new infrastructure based on unsustainable amounts of debt, then host countries default and China gets a new link in its "Belt and Road Initiative."

Pro-China narrative

Chinese "debt trap" accusations are a myth, given only 10% of the nation's debt is owed to the PRC. Sri Lanka's debt crisis is the result of Western meddling. The pandemic and some ill-timed policies have fueled the crisis, but it was engendered when the country acceded to the neoliberal path promoted by the West through undemocratic institutions that impose impossible conditions on developing countries.

Narrative C

The only ones responsible for Sri Lanka's situation are the entrenched political elite. Prior to Sri Lanka injecting liquidity in its economy amid the pandemic, the IMF had warned the country its debt was unsustainable and proposed measures to solve the problem in a five-year timeframe. However, Sri Lankan leaders refused to restructure its debt, claiming that the situation was manageable.