Sri Lanka to restart IMF bailout talks, president calls for unity government

Sri Lanka’s new president said, on Wednesday, that his country would resume rescue talks with the International Monetary Fund in August, while calling for lawmakers to form an all-party government to solve a stifling economic crisis.

In a speech in Parliament, President Ranil Wickremesinghe said constitutional amendments were needed to reduce presidential powers – noting that it would satisfy a key demand of protesters who ousted his predecessor, Gotabaya Rajapaksa.

“The head of a country should not be a king or a god above the people. He or she is a citizen,” said Wickremesinghe.

The island nation of 22 million is facing its worst financial crisis since independence from Britain in 1948 with its foreign exchange reserves falling to record levels, the economy hit by the COVID-19 pandemic and a sharp drop in government revenues.

Angry at persistent shortages of necessities, including fuel and medicine, and skyrocketing inflation that topped 60 percent year-on-year, hundreds of thousands of people took to the streets in early July, forcing Rajapaksa to flee first from the country and then later. Leave the office.

Wickremesinghe, who was then Prime Minister, took over as Acting President and Parliament later confirmed him to that position.

In his first major address to parliament since taking office, Wickremesinghe told lawmakers that discussions with the International Monetary Fund on a four-year program that could provide up to $3 billion would resume in August.

The government is working with its financial and legal advisors Lazard and Clifford Chance to finalize a plan to restructure foreign debt, including about $12 billion owed to bondholders.

“We will present this plan to the IMF in the near future, and negotiate with countries that have provided loan assistance,” Wickremesinghe said. Subsequent negotiations with private creditors will also begin to reach consensus.

Wickremesinghe, a veteran lawmaker whose party has only held one seat in parliament, won a leadership vote in the 225-member assembly last month with the support of the country’s ruling party dominated by the Rajapaksa family.

But the new president reiterated his call for a unity government, adding that he had already started discussions with some groups.

“I respectfully extend a hand of friendship to all of you. I confidently invite you to set aside the past and come together for the sake of the country,” said Wickremesinghe.

Opposition MP Harsha de Silva supported the president’s proposal.

“We must unite. Specifically an all-party or multi-party government for a limited period of time to work towards creating this new #SriLanka on the Joint Minimum Platform,” he said in a tweet.

An interim budget is likely to be presented within weeks, and Wickremesinghe said his government is working on a long-term economic plan. This will include reducing public debt from its current level of 140 percent of Sri Lanka’s GDP to less than 100 percent within 10 years and creating a budget surplus by 2025.

He did not give any details.

Wickremesinghe, who has been accused by activists and rights groups of cracking down on anti-government protesters, said peaceful struggle was a fundamental right but he would not tolerate violence.

“I will not allow anyone to act outside the law,” he said.

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