AKD Govt. faces ground realities in governance and economic recovery while chaos reigns in Opposition
- AKD tells IMF third review can be after Parliamentary Polls; Jaishankar told project discussions also after polls
- Next tranche under IMF’s EFF likely to be delayed till 2025; Govt. seeks some changes within existing parameters
- IMF and Paris Club OCC consultations on debt restructuring conclude; approval granted to ISB holders’ deal
- AKD’s meetings with foreign envoys witness issues in translations; Govt. yet to formulate foreign policy direction
President Anura Kumara Dissanayake (AKD) and his Government were no doubt awakened to the ground realities in governance as well as the country’s precarious economic situation following the many meetings held by the new President last week with India’s External Affairs Minister Dr. S. Jaishankar, members of the International Monetary Fund (IMF), and envoys representing several key foreign nations.
The one thing that all these meetings highlighted was that Sri Lanka was at an economic crossroads and that the new President would have to tread carefully to ensure recovery and not let Sri Lanka slide back to 2022.
The AKD Government will definitely have to give prominence to foreign policy, given the increasing engagements required in Sri Lanka’s recovery path. Geopolitical sensitivities will also have to be given special focus, given the preconceived notion that being a Leftist Government, there could be more alignment with the Chinese, while neighbouring India keeps a close watch after playing a significant role in assisting Sri Lanka’s economic recovery programme by way of financial aid as well as intervening to secure the IMF programme for Sri Lanka and the debt restructuring programme.
Unfortunately, it is reliably learnt that there have been concerns over translations during the President’s meetings with the foreign envoys last week. Several foreign envoys had realised that what they were articulating to AKD had not been fully translated to the President. A continuation of such a scenario could lead to complications in foreign relations. It is also learnt that the AKD Government is yet to grasp the need for a foreign policy direction, relying mostly on the Ministry of Foreign Affairs (MFA) for current engagements.
However, there was also good news that came out on Friday (4) night: the announcement of the successful completion of the IMF and Official Creditor Committee (OCC) of the Paris Club consultation process on Sri Lanka’s debt restructuring programme.
Accordingly, the Government on Friday night announced: “The Democratic Socialist Republic of Sri Lanka (‘Sri Lanka’) is pleased to announce that, following the Agreement in Principle (AIP) reached with representatives of its international and local holders of International Sovereign Bonds (ISBs) on 19 September 2024, the Sri Lankan authorities have now completed their consultations with Sri Lanka’s OCC and the IMF regarding the compliance of the AIP terms with the Comparability of Treatment (CoT) principle and the parameters of Sri Lanka’s IMF-supported programme.”
The Sri Lankan Government had also received confirmation from the IMF staff that the AIP terms met programme parameters under the Extended Fund Facility (EFF) arrangement second review macro framework, when considered in conjunction with the restructuring of official claims in line with the terms agreed with the OCC and China’s Export-Import (Exim) Bank in June.
The Government’s announcement also notes: “Following the Presidential Election held in Sri Lanka on Saturday, 21 September, and the appointment of the new Government on 25 September, the Sri Lankan authorities confirm their endorsement of the programme debt targets and the AIP terms as announced on 19 September and confirm their intention to expedite the implementation of the ISBs’ restructuring transaction in line with these terms.”
It is however learnt that the AKD Government is looking at the possibility of revisiting Sri Lanka’s deal on debt treatment with ISB holders. Although a final decision has not been reached on the matter, President AKD’s Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) was critical of the deal reached between the ISB holders and the then Ranil Wickremesinghe Government just days before the September Presidential Election.
Also of concern would be the delay in conducting the third review of Sri Lanka by the IMF team until after the 14 November Parliamentary Election. This will effectively mean a delay in the disbursement of the next tranche under the EFF programme to Sri Lanka until next year.
In the event the IMF review is carried out towards mid- to end-November, the report might not be included in the IMF Executive Board schedule for December, before the holiday season. The review report will then be taken up by the Executive Board in January 2025.
Meanwhile, the AKD Government’s economic team that met with the IMF team last week is also expected to travel to Washington, DC towards the end of this month to discuss the changes being proposed by the new Government within the parameters of the ongoing programme.
An IMF delegation led by Asia Pacific Department Director Krishna Srinivasan met with President AKD on Thursday (3) and Friday to discuss the ongoing EFF programme. An IMF team led by Peter Breuer met with AKD’s economic team that will spearhead the negotiations with the fund from now on. This team will however include two members from the previous team – Central Bank Governor Dr. Nandalal Weerasinghe and Finance Ministry Secretary Mahinda Siriwardana.
In all these meetings, the new Government emphasised the need for the inclusion of welfare schemes and reducing the tax burden on the masses within the existing parameters of the programme. The IMF, it is learnt, had agreed that the proposals could be looked at while giving priority to State revenue targets.
The IMF meanwhile has warned there are important vulnerabilities and uncertainties in Sri Lanka. IMF Communications Department Director Julie Kozack said that sustaining the reform momentum in Sri Lanka was critical.










