The Sri Lankan government is intending to start discussions with the International Monetary Fund, seeking its assistance in reducing the debt burden it has amassed under former president Mahinda Rajapaksa.

Finance Minister Ravi Karunayake. who met with IMF officials earlier today, told Bloomberg before the meeting, the new president, Maithripala Sirisena, wanted to reduce the amount spent on interest on Sri Lanka’s $55bn (Rs7.2tn) debt.

“We are initiating discussions on a new program,” Mr Karunanayake, said yesterday, but declined to give further details, only adding that “we will not be dictated to by any of these multilateral agencies.”

Mr Karunayake said the new president sought to increase taxes on the “super-rich” to benefit poorer citizens, adding he would maintain fiscal discipline and eliminate corruption.

Sri Lanka’s ties with China, who have loaned the government billions of dollars for infrastructure projects on the island, will also be reviewed by Mr Sirisena. China is Sri Lanka’s largest investor, with interest rates on some loans ranging from 1.53% to 6.5%, much higher than usual rates for infrastructure loans from the World Bank or the Asian Development Bank.

According to Bloomberg, about 40% of government revenues go to repaying interest on borrowings, one of the highest among countries rated by Moody’s Investors Service. Sri Lanka’s debt burden of 78% of gross domestic product also remains higher than similarly rated peers such as Vietnam and Kenya, in which the median is 41 percent of GDP, Moody’s said earlier this month.

“What we are telling the Chinese is nobody is prevented from doing projects here,” Mr Karunanayake said. “But basically we cannot be told to endorse projects where costs are inflated.”

The minister said Sri Lanka is seeking to expand trade ties with the EU, which withdrew the country’s preferential trade access in 2010 due to human rights abuses during the armed conflict.

The EU’s proportion of total trade in the country fell to 14% in 2013 from 23% in 2003, while China’s grew to 12% from 3% in the same time period, data compiled by Bloomberg shows.

Mr Karunayake said his ministry was also “collating the real situation” on Sri Lanka’s gross domestic product and debt, after years of manipulation of flawed economic data, giving a skewed impression of economic growth.

After the January 8 election, Standard & Poor’s financial analysts said Sri Lanka’s credit rating could fall due to President Sirisena’s ragtag coalition, which includes including free-market capitalists, hard-line Buddhist parties and the island’s largest Tamil and Muslim parties, who could press for changes in fiscal policies.

“We will have a transparent environment for foreign investors,” the minister said, adding that the government will “maintain macro-economic fundamentals conducive for investors.”

“The overall budget deficit will not be increased,” Mr Karunanayake said. “We will not burden the people. We are reducing costs, eradicating corruption.”

The finance minister said the government had not yet decided whether it would privatise more companies, a policy endorsed by Prime Minister Ranil Wickremesinghe during his two previous tenures.

Sri Lanka owes $2.6 billion to one Chinese bank (21 August 2014)

China’s loans to Sri Lanka reach nearly $4 billion (04 May 2014)

Flawed economic data - The Sunday Times (12 Jan 2014)

Economic data ‘jilmart’ and development myth revealed - The Sunday Times (12 Jan 2014)

Mahinda Economics (21 September 2011)

Who benefits from Chinese loans to Sri Lanka? (21 November 2010)