Sri Lanka has now been to the International Monetary Fund (IMF) 17 times. The question now before the National People’s Power (NPP) Government is whether to make it 18.
The current Extended Fund Facility is due to end in March 2027, and the Cabinet has appointed a committee headed by the Deputy Minister of Finance and Planning to examine whether the country should enter another programme after that, and if so, what kind.
On the face of it, this is sensible housekeeping, and the President was candid about his reasons. It was difficult, he said, to predict the fallout from global and natural disasters at a time when the country was trying to move from stabilisation to growth, and our reserves need to be strengthened further. Few would quarrel with that. The war in the Middle East has already cost the Treasury dearly, the bill for Cyclone Ditwah is still being paid, and El Niño is forecast to peak in February next year.
Yet the way this decision is being approached is cause for concern. Whether to stay under the fund’s wing is not a technical matter to be settled by a handful of officials and then announced as a fait accompli. It goes to the heart of how this country will be run for the rest of the decade and the public deserves a say in it.
Consider what is at stake. A new programme would bring another set of targets on revenue, spending, State-owned enterprises, and the Central Bank, together with the reviews, the conditions, and the disbursements that come with them. That may well be the right choice, because an IMF programme remains a powerful signal to creditors and markets that a country means business. Indeed, the next tranche of about $ 345 million under the present arrangement hinges on this very budget staying within the agreed limits, which shows just how closely our fiscal choices remain tied to Washington.
On the other hand, there is a genuine case for standing on our own feet. The Public Financial Management Act now gives the country fiscal rules of its own, and the Government has set itself targets of a primary surplus of 2.3% of GDP and a deficit below 5%. If those rules mean anything, they ought to be able to anchor policy without someone looking over our shoulder. There are also lighter options, such as non-financing arrangements under which the fund keeps an eye on policy without lending money, which other countries have used to manage exactly this kind of transition.
There is no easy answer, and the budget’s own annexures show why. Interest payments alone will swallow Rs. 2,643 billion next year, the gross borrowing requirement stands at Rs. 3,800 billion, and revenue, at 15.8% of GDP, is still below the Government’s own floor of 16%. A country in that position cannot afford to make the wrong call, whichever way it goes.
That is exactly why the process matters as much as the outcome. Not so long ago, the NPP itself argued that the Debt Sustainability Analysis agreed with the fund should be revisited, and the Opposition Leader reminded Parliament on Friday (13) that it never was. Whatever one makes of that charge, it shows how thin public trust on this subject has worn. The crisis of 2022 taught us, at great cost, what happens when big economic decisions are taken without proper scrutiny.
The committee’s terms of reference should therefore be made public, along with a timeline. Its report should be tabled in Parliament and debated before any letter is sent to Washington. The Committee on Public Finance, independent economists, the business chambers, and the trade unions should all be heard. And if the Government does decide to seek another programme, it must explain clearly what it hopes to gain, what conditions it is prepared to accept, and how long it expects to stay.
This Government came to power promising a new political culture, one in which the people are treated as the true owners of public money. The President repeated that very line on Thursday (12). There could be no better test of it than this. After 17 programmes, the real question is whether we can finally manage our own affairs with enough discipline to live without one, and if not, why not. That is a question the people, and not just a committee, should help to answer.