Sri Lanka’s main opposition leader said he’ll reopen negotiations with the International Monetary Fund on its $3 billion loan if he wins next week’s presidential election to ease the financial burden on working class people.
Sajith Premadasa, 57, wants rich individuals to bear more of the cost of the economic adjustment that came with the bailout program. The austerity measures that were imposed, such as tax and electricity-price hikes, and the debt restructuring, have made the incumbent leader Ranil Wickremesinghe deeply unpopular, creating a tight race for the Sept. 21 vote.
“We will make sure there is justice and fairness,” Premadasa said in an interview in his Colombo office. “The burden should be shared by the super rich, not the working class poor.”
The election will be the first for the country since an economic crisis in 2022 caused living standards to plunge and the government to default on its debt for the first time ever. Widespread unrest that followed forced the populist Gotabaya Rajapaksa to flee the country and resign. His successor Wickremesinghe went on to negotiate the IMF bailout the following year.
Premadasa, who runs a breakaway group that splintered from Wickremesinghe’s party in 2020, has emerged as one of the three leading candidates contesting an election that analysts say is too close to call. He’ll face Wickremesinghe and Anura Kumara Dissanayake, a candidate with roots in Marxist socialist policy.
Both Premadasa and Dissanayake have said they’ll reopen negotiations with the IMF, adding to policy uncertainty. The IMF needs to conduct a third review of the loan program before it disburses the next tranche of funding, estimated at about $350 million.
Sri Lanka’s government still hasn’t finalized debt restructuring deals with some of its creditors two years after defaulting. Investors have in recent weeks started to cut their exposure to the nation’s dollar bonds amid concerns over further delays in the debt overhaul.
The nation’s private creditors and government officials are holding a third round of talks this week to agree on the restructuring of $12.6 billion in defaulted bonds, Bloomberg News reported earlier, citing people familiar with the matter. The government is seeking to reach a final agreement on the debt before the election, one of the people said, adding that a statement with details on the ongoing negotiations may be released next week.
Premadasa declined to give details of what he’ll seek to change in the IMF loan conditions, although he was critical of a domestic debt restructuring agreed to by the current administration, which he called “dastardly” unfair in its treatment of local pension funds.
In an Aug. 2 statement, the IMF said that the timing of the program’s third review will be discussed with the government after the polls. Julie Kozack, the IMF’s chief spokesperson, reiterated that view on Thursday in Washington, saying “we will move forward with program discussions after the presidential elections take place.”
Dhananath Fernando, chief executive officer of Advocata Institute, a Colombo-based think tank, said rising costs, including food price hikes, can’t be fully attributed to the IMF program, and energy prices were raised to partly make up for the currency’s depreciation.
He noted that most food prices and energy costs have eased in the past two years, although lower-income consumers are still “worse off compared to before the crisis.”
Boosting Exports
Premadasa leads the Samagi Jana Sandhanaya and has previously held ministerial portfolios in government, including housing and health. His manifesto, titled ‘Towards an Advanced Social Market Economy,’ champions boosting exports, reducing taxes, setting up an independent public prosecutor to tackle corruption and strengthening the rule of law.
“Export-driven economic development is one of our main mantras,” Premadasa said in the interview on Wednesday. “We would also have a purposeful effort to promote manufacturing industry, as it is of great importance to ensure that we have quality economic growth.”
Premadasa said he champions good governance and will strive to improve Sri Lanka’s business environment to help lure foreign direct investment. In a reference to popular leftist candidate Dissanayake, Premadasa said “Marxist ideologies, and extreme hardline leftist tendencies will certainly not be the kind of situation which would attract FDI.”
Dissanayake is gaining momentum in the race on a campaign platform of eliminating corruption. His coalition of leftist parties and groups, backed by protesters who ousted the Rajapaksa government in 2022, opposes the debt restructuring framework agreed with the multilateral lender.
Premadasa said the IMF program needs to be reworked to ensure a better outcome for citizens.
“We need to be very professional in our negotiations with the IMF and we will have a good deal, a strong deal,” he said. “Nothing will be derailed but everything would be humanized.”
Source: Bloomberg
