Sri Lanka won’t get a bailout from the IMF until chaos ends, Johns Hopkins professor says

Environment

Sri Lanka will need to emerge from its current state of chaos before the International Monetary Fund can step in with a bailout, according to a professor from Johns Hopkins University.

“The IMF cannot… interact with the government when things are in a continuing crisis mode. So until the government stabilizes, until they have a minister of finance, there’s no one for the IMF to talk with,” Deborah Brautigam told CNBC’s “Squawk Box Asia” on Friday.

Sri Lanka has been wracked by months of protests and is suffering its worst economic crisis since independence.

Ordinary people are struggling to buy essentials such as food, medicine and fuel, setting off raging protests against the government’s mismanagement. Last week, ex-president Gotabaya Rajapaksa fled the country and resigned after protesters stormed his residence.

The country’s legislators have since elected Ranil Wickremesinghe, the country’s former prime minister, as president. The 73-year-old took over as prime minister in May when Rajapaksa’s elder brother Mahinda Rajapaksa resigned.

It is not yet clear if these changes in leadership will satisfy protesters.

The IMF cannot offer a program to Sri Lanka as long as the chaos in the country continues, says an expert. Raging protests have roiled the nation for months, with a file photo here capturing an anti-government demonstration outside the President’s office in Colombo earlier this month.
– | Afp | Getty Images

The IMF needs to be able to work with the Sri Lankan government to put together a program, said Brautigam, a professor of international political economy.

“The IMF will not lend into a situation where they deem their money will not be repaid,” she added.

But uncertainty continued on Friday, with Wickremesinghe sending troops into a popular protest site, with soldiers destroying tents and makeshift camps a day after he was sworn in, Reuters reported.

The Johns Hopkins professor also said the IMF needs assurances from the government that it will get its “fiscal house in order.”  She said the IMF would try to make sure that government revenues and their expenditures “match up better.”

“And so if Sri Lanka cannot provide assurances, there will be nothing forthcoming from the IMF,” Brautigam said, adding that Sri Lanka would be unable to provide what is needed “as long as the crisis is ongoing.” 

She said the IMF will also seek assurances from Sri Lanka’s creditors that they will provide whatever assistance is necessary to bring the country’s debt to a sustainable level.

The IMF cannot go ahead with a program for the country without those assurances, she added.

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