Sri Lankan President Anura Kumara Dissanayake has reversed his earlier commitment to renegotiate the terms of the International Monetary Fund (IMF) bailout program, as the global body decided to approve the release of $333 million as part of the third review of Sri Lanka’s $2.9 billion Extended Fund Facility (EFF).

During his presidential campaign and subsequent rise to power, Dissanayake repeatedly criticised the austerity measures tied to the IMF bailout. He pledged to revisit and renegotiate the stringent conditions imposed under the agreement brokered by his predecessor, Ranil Wickremesinghe.

However, in his first parliamentary address after his National People’s Power (NPP) party secured a landslide victory, Dissanayake declared his intent to uphold the agreement as negotiated. “The reality in front of us now is that we have no time to check whether these agreements are beneficial or harmful to us, as these are the results of nearly two years of discussions,” he said. “We cannot go forward if we continue through another two years to study and renegotiate the previous agreement.”

IMF Senior Mission Chief Peter Breuer emphasized the importance of policy continuity, stating that Sri Lankan “authorities have committed to staying within the guardrails of the programme.”

Breuer also lauded the government’s anti-corruption pledges, describing them as critical for reinvigorating governance reforms and bolstering economic confidence. He warned, however, that the economy remains vulnerable and emphasized the need to complete $12.5 billion in bondholder debt restructuring and $10 billion in bilateral agreements with creditors such as China, Japan, and India.

The IMF bailout, initially secured in March 2023, was critical in stabilizing Sri Lanka’s economy following the 2022 crisis, which saw the nation default on $46 billion in external debt. Inflation, which peaked at 70%, has since been tamed, and the economy is projected to grow by 4.4% this year. Yet, the austerity measures tied to the bailout have left many grappling with higher costs for food, fuel, and essential services.

Despite promising to reduce taxes and enhance welfare programs during his campaign, AKD’s government has instead reaffirmed its commitment to the IMF’s fiscal targets. His reversal has drawn sharp criticism from political analysts and activists who supported his initial stance.

With the release of the $333 million tranche, Sri Lanka has now received $1.3 billion of the $2.9 billion IMF loan. However, significant challenges remain, including finalizing debt restructuring and implementing additional reforms to meet the bailout’s stringent conditions. The IMF has made clear that continued adherence to the program’s terms will be critical to maintaining the “hard-won gains” of the bailout.