Sri Lanka is facing a serious economic crisis, and the International Monetary Fund (IMF) has stepped in to help, but with a big catch: they’re making the country follow tough new rules. These rules include cutting public spending, increasing taxes, and implementing other harsh austerity measures. As a result, everyday life has become even harder for the people of Sri Lanka, leading to frustration and anger across the country.
A new president, Anura Dissanayake, took office recently after winning the election. He had made big promises during his campaign, telling Sri Lankans that he would renegotiate the IMF deal to ease their hardships. But now that he’s in charge, he’s facing an uphill battle. The IMF has already approved a $3 billion financial aid package for Sri Lanka, disbursing over $1 billion so far. This deal was meant to help the country recover after it defaulted on its debts in 2022, but it came with strict conditions that have only added to the suffering.
Economist Dr. Anuradha Chenoy explained how the IMF often imposes the same harsh measures on smaller, struggling countries like Sri Lanka. They push these nations to privatize public sectors, cut social programs, and introduce austerity measures, making life even harder for ordinary people. These policies are supposed to attract foreign investment, but in reality, they often lead to increased poverty and inequality.
Sri Lanka’s population is made up of different ethnic groups—Sinhalese, Tamils, and Muslims—and when economic problems hit, it’s common for tensions between these communities to rise. Populist governments sometimes fuel these tensions, blaming one group or another for the country’s problems, turning economic issues into political and social crises.
Sri Lanka’s previous government, led by Gotabaya Rajapaksa, made some poor decisions that worsened the crisis. One of the most controversial moves was pushing the country toward organic farming while reducing taxes for the wealthy. This led to widespread protests, not just against the government but also against the IMF for its role in making things worse.
Now, President Dissanayake faces a major challenge: resisting the IMF’s conditions while trying to save his country from further hardship. According to Dr. Chenoy, the IMF’s policies can trap small nations like Sri Lanka in a cycle of debt and inequality, where the rich get richer, and the poor suffer more.
Dr. Chenoy also talked about how Western powers are able to influence countries like Sri Lanka more easily when their economies are tied up in IMF deals. The IMF’s grip on Sri Lanka has led to problems like the ongoing energy crisis, where the country has had to pay for oil imports in dollars, further straining its economy.
The stakes are high. Dr. Chenoy warns that if the situation doesn’t improve, Sri Lanka could face another mass uprising. If that happens, foreign investors might pull out, tourists could stop visiting, and the country could spiral into civil unrest.
There’s a possible alternative, though. Dr. Chenoy pointed to the BRICS Bank, a financial institution created by developing countries like Brazil, Russia, India, China, and South Africa. Unlike the IMF, the BRICS Bank doesn’t impose harsh conditions on its loans and could offer Sri Lanka a lifeline. While it’s not yet as powerful as the IMF or the World Bank, the BRICS Bank provides loans in local currencies, helping countries like Sri Lanka avoid the harsh terms imposed by Western lenders.
As Sri Lanka’s new leader, Dissanayake has a tough road ahead. He needs to find ways to meet the IMF’s demands without causing more suffering, while also looking for alternatives like the BRICS Bank to ease the pressure. His presidency will be defined by whether he can break free from the cycle of debt and bring real relief to the people of Sri Lanka, or whether the country will continue to struggle under the weight of IMF policies.
