Following the International Monetary Fund’s (IMF) visit to Sri Lanka, the US Senate Foreign Relations Committee has stressed that any agreement must be contingent on critical reforms of the Central Bank of Sri Lanka and warned that without such reforms Sri Lanka would suffer further economic mismanagement and uncontrollable debt.

Any @IMFNews agreement with #SriLanka must be contingent on @CBSL independence, strong anti-corruption measures & promotion of the rule of law. Without these critical reforms, Sri Lanka could suffer further economic mismanagement & uncontrollable debt. https://t.co/oMdT7QIwZP

— Senate Foreign Relations Committee (@SFRCdems) July 1, 2022

Sri Lanka’s ten-day discussion with the IMF concluded without the financial institution agreeing to a bailout of the bankrupt island. In May, the country defaulted on its international debt and became the first country in the Asia-Pacific to default on its debt in decades. The country is currently seeking to restructure debts of more than $50bn it owes to foreign creditors.

Sri Lanka’s economic crisis has been driven by disastrous mismanagement of the economy which has seen trust amongst investors and the island’s credit rating plummet. In a bid to preserve the country’s dwindling foreign reserves, Sri Lanka doubled down imposing severe trade restrictions on essential goods including essential goods such as turmeric. This was paired with disastrous tax cuts that saw tax receipts plummet by a quarter and the budget deficit rising to 14% of GDP. Two-thirds of government revenue now go towards paying off interest payments.

Read more here: Sri Lanka’s crisis is of its own making