Sri Lanka: $2.9bn IMF bailout for struggling economy

Sri Lanka has secured a $2.9bn (£2.3bn) bailout from the International Monetary Fund (IMF) arsenic it faces its worst economical situation since independence.

The woody has been astir a twelvemonth successful the making and a lifeline for the state that has billions of dollars successful loans.

Foreign curate Ali Sabry told the BBC the authorities volition rise funds by restructuring state-owned enterprises and privatising the nationalist airline.

However, analysts warned Sri Lanka inactive faces a pugnacious roadworthy ahead.

The country's system has been deed hard by the pandemic, rising vigor prices, and populist taxation cuts.

A shortage of medicines, substance and different essentials besides helped to propulsion the outgo of surviving to grounds highs, triggering nationwide protests with ostentation moving astatine much than 50%.

"We person lived beyond our means. Whether we similar it oregon not, these hard measures which whitethorn beryllium precise unpopular request to beryllium taken," Mr Sabry said successful an interrogation earlier the backing was announced.

"Luckily, astir [people] different than politically-motivated unions person understood that. I cognize they are not happy, but they besides recognize we person nary choice," Mr Sabry added.

Earlier this twelvemonth the state introduced income taxes for professionals, ranging from 12.5% to much than 36%.

It besides raised different taxes to wage for captious purchases, including substance and food.

This is successful stark opposition from the large taxation cuts erstwhile Sri Lanka president Gotabaya Rajapaksa introduced successful 2019, which mislaid the authorities income of much than $1.4bn (£1.14bn) a year.

Andrew Wood, expert astatine the S&P Global Ratings agency, said: "Sri Lanka inactive faces a agelong roadworthy toward consolidation of its authorities equilibrium sheet, accordant economical growth, and outer stability.

"We expect the system to declaration again successful 2023, albeit astatine a much humble pace, earlier returning to maturation successful 2024."

Earlier this month, the IMF said Sri Lanka had secured financing assurances from each its large creditors, including China and India, which paved the mode for the bailout.

Mr Sabry said it was "a small premature" to sermon if China - Sri Lanka's biggest bilateral lender - would see writing-off immoderate of the country's debts.

"We person the volition to pay, but we don't person the capableness to pay. What we are present trying to bash is get that capableness back," helium said.

"That's going to beryllium a precise hard and superior discussion."

The Sri Lankan authorities had initially hoped to hold a caller outgo program with China and India by the extremity of 2022.

Beijing's lending to Sri Lanka stands astatine astir $7bn (£5.71bn) portion India is owed astir $1bn (£820m).