Sri Lanka’s fragile economic recovery could be hampered by threatened trade union strikes over reduced benefits for government employees in this year’s budget, the IMF said yesterday.
Sri Lankan President Anura Kumara Dissanayake’s maiden budget raised public sector salaries, but also made deep cuts to longstanding perks in a continuing effort to repair the island nation’s tattered finances.
Sri Lanka’s main doctors’ union is considering a strike from today to protest against cuts to their allowances, while teachers are also considering stoppages.
Photo: EPA-EFE
IMF senior mission chief for Sri Lanka Peter Breuer said the budget was the “last big push” for the country’s austerity program, adding that everyone who can “should make a sacrifice.”
“Sticking with the reforms is really the best way out for Sri Lanka to assure its sustainability,” Breuer told reporters.
“I think it’s important for everyone in Sri Lanka to recognize that,” he said. “This is the last budget where there is still a bit of an increase in revenues needed.”
In 2022, the country endured an unprecedented economic crisis that caused widespread shortages of food, fuel and other essentials. It secured a US$2.9 billion bailout loan from the IMF in 2023, almost a year after defaulting on US$46 billion in foreign debt.
Successive governments have since raised taxes and cut public spending to increase state revenue.
The next year would be less painful, but the country must remain committed to economic reforms, Breuer said.
“This is the last big push,” he said. “Thereafter, it will be much easier going forward.”
The IMF last week released its fourth tranche of US$334 million in its rescue package for Sri Lanka, commending the country for adhering to its economic reform pledges.
“Reforms in Sri Lanka are bearing fruit and the economic recovery has been remarkable,” IMF deputy managing director Kenji Okamura said in a statement at the time.
“Inflation remains low, revenue collection is improving, and reserves continue to accumulate,” he said. “The recovery is expected to continue in 2025.”
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