In the lead-up to Sri Lanka’s September 2024 parliamentary elections, Japanese Ambassador Mizukoshi Hideaki issued a decisive reminder: whoever wins must honour the International Monetary Fund’s (IMF) roadmap. Calling it an essential lifeline, Hideaki emphasized that Sri Lanka’s post-Aragalaya recovery would falter without strict adherence to IMF-mandated economic and social reforms. Echoing him, Indian High Commissioner Santosh Jha stressed policy consistency to regain international trust.
By that point, Sri Lanka had already embraced its 17th IMF programme. The four-year Extended Fund Facility (EFF) agreement, approved in March 2023, was worth 2.3 billion in Special Drawing Rights. The first tranche of $330 million followed swiftly, with then-President Ranil Wickremesinghe celebrating the approval as a signature achievement.
But political contradictions mounted. Wickremesinghe pushed two critical IMF-linked legislations through Parliament in July 2024: the Public Financial Management Bill and the Economic Transformation Bill. Despite widespread public opposition, major parties, including the SJB, SLPP, and NPP, allowed them to pass unchallenged—amendments and all. No vote was called. The silence was political consent.
This quiet consensus locked all players into the IMF framework, regardless of pre-election rhetoric. So when Wickremesinghe ran for President later that year, many interpreted it as a calculated attempt to split the anti-incumbency vote. His weak candidacy gave Anura Kumara Dissanayake of the NPP the edge, defeating a potentially stronger SJB-UNP alliance.
Now in power, President Dissanayake also holds the Finance Minister’s portfolio. The IMF demands cost-reflective electricity pricing before disbursing the fourth $344 million tranche. Yet Dissanayake had pledged a 30% tariff reduction on the campaign trail. That promise is now politically toxic.
In May 2025, during a televised appearance, Dissanayake confirmed the unpopular hike. The decision undermined one of the NPP’s most resonant pledges and coincided with a stark decline in its support base. Between the general and provincial council elections, the NPP shed 2.3 million votes, particularly in Tamil-majority areas. The backlash was immediate and widespread.
Compounding the dilemma is the prior passage of IMF bills, which weakened regulatory bodies like the Public Utilities Commission of Sri Lanka (PUCSL). Though PUCSL initiated consultations under the Electricity Act, the outcome was never in doubt. The IMF’s prior actions are non-negotiable.
Treasury Secretary Mahinda Siriwardana had forewarned this scenario. In a televised address during the peak of the crisis, he candidly acknowledged Sri Lanka’s history of misleading the IMF and stressed that failure this time would terminate future support. IMF spokesperson Julie Kozack reinforced this by making it clear that electricity pricing reforms—and likely future hikes in water and other utilities are essential to further tranches.
This places the NPP in a precarious position: backtracking on reforms risks derailing recovery; proceeding alienates voters. With the debt moratorium ending in 2027, accumulating USD reserves to meet future obligations is now the administration’s responsibility. The room to manoeuvre is virtually nonexistent.
Amid this economic uncertainty, unemployment rises, poverty deepens, and living standards drop. The government must now craft robust, evidence-based recovery policies without compromising IMF commitments or losing political ground.
Sri Lanka is not alone in navigating this tightrope. A parallel can be drawn to Pakistan. Despite Indian objections citing potential misuse of funds for “terrorist infrastructure,” the IMF released a $1 billion tranche to Pakistan in 2025, part of a broader $7 billion package. IMF officials, including Kozack, assured that disbursements were tightly monitored. Pakistan denied any involvement in attacks like the Pahalgam massacre, which India cited.
This scenario resembles Western attempts to block IMF support to Sri Lanka during its 2009 military offensive against the LTTE. Then too, international actors, human rights groups, and Tamil diaspora lobbies tried to halt a $1.9 billion facility. Even U.S. Secretary of State Hillary Clinton was drawn into the debate. Yet the IMF, asserting independence, proceeded with the package.
The same geopolitical stakes apply today. In March 2024, a senior IMF delegation led by Peter Breuer met with NPP officials at Colombo’s Shangri-La Hotel to discuss debt restructuring and anti-fraud measures. Present were IMF representatives Katsiaryna Svyedyzenka and Manavee Abeywickrama, along with NPP members Vijitha Herath, Muditha Nanayakkara, Professors Anil Jayantha, Seetha Bandara, Harshana Suriyapperuma, and former MP Sunil Handunnetti.
This dialogue followed earlier consultations at JVP headquarters in January 2024. All major political factions were fully briefed. In fact, both the NPP and SJB had boycotted a similar IMF meeting convened by President Wickremesinghe months earlier. Thus, no party can now plead ignorance.
The IMF remedy is not merely an economic prescription. It is a political reality. For Sri Lanka, the choice is binary: embrace tough reforms or risk total economic isolation. And with every passing day, that bitter pill grows harder to swallow.
SOURCE :- SRI LANKAN GUARDIAN
