IMF Warns Sri Lanka’s Economic Recovery at Risk Amid Possible Trade Union Strikes

IMF warns Sri Lanka’s economic recovery is at risk as trade union strikes loom over budget cuts to government benefits. [Image via Reuters/File]

COLOMBO: Sri Lanka’s fragile economic recovery could be hampered by threatened trade union strikes over reduced benefits for government employees in this year’s budget, the International Monetary Fund (IMF) warned on Tuesday.

Leftist President Anura Kumara Dissanayake’s maiden budget raised public sector salaries but also made deep cuts to longstanding perks in a continuing effort to repair the island nation’s tattered finances.

Sri Lanka’s main doctors’ union is considering a strike from Wednesday to protest against cuts to their allowances, while teachers are also considering stoppages.

Also See: Sri Lanka and UAE Strengthen Trade Ties

IMF team leader Peter Breuer said the budget was the “last big push” for Sri Lanka’s austerity programme and said everyone who can “should make a sacrifice”.

“Sticking with the reforms is really the best way out for Sri Lanka to assure its sustainability,” Breuer told reporters.

“I think it’s important for everyone in Sri Lanka to recognise that,” he said. “This is the last budget where there is still a bit of an increase in revenues needed.”

Sri Lanka suffered an unprecedented economic crisis in 2022 that caused widespread shortages of food, fuel and other essentials.

The island nation secured a $2.9 billion bailout loan from the IMF in 2023, almost a year after defaulting on its $46 billion foreign debt. Successive governments have since raised taxes and cut public spending to raise state revenue.

Breuer said the next year would be less painful, but the country must remain committed to economic reforms. “This is the last big push,” he said. “Thereafter, it will be much easier going forward.”

The IMF released last week its fourth tranche of $334 million in its rescue package for Sri Lanka, commending the country for adhering to its economic reform pledges. “Reforms in Sri Lanka are bearing fruit and the economic recovery has been remarkable,” IMF Deputy Managing Director Kenji Okamura said in a statement at the time. “Inflation remains low, revenue collection is improving, and reserves continue to accumulate,” he said. “The recovery is expected to continue in 2025.”

This news is sourced from The News and is intended for informational purposes only.

News Desk

Your trusted source for insightful journalism. Stay informed with our compelling coverage of global affairs, business, technology, and more.

Recent

What is the Durand Line?

What is Durand Line?

The Durand Line, a 2,670-kilometer border drawn in 1893 between Afghanistan and British India, remains one of South Asia’s many contentious frontiers. Rejected by every Afghan government but recognized internationally, it symbolizes the region’s colonial legacy and ongoing power struggles. This backgrounder explores its origins in the Great Game, the legal and political controversies surrounding it, and its lasting impact on Pakistan-Afghanistan relations and regional security.

Read More »
Can war against terror be won without political consensus?

Can war against terror be won without political consensus?

For over two decades, Pakistan has battled the scourge of terrorism. Yet, despite military successes, the absence of political consensus continues to jeopardize lasting peace. As divisions deepen and populist narratives gain ground, the question remains: can Pakistan truly defeat terror without unity at the top?

Read More »
Shifting Sands: How Multipolar Pragmatism Is Redefining Global Alliances

Shifting Sands: How Multipolar Pragmatism Is Redefining Global Alliances

The world is entering an era of multipolar pragmatism where ideology no longer defines alliances. From NATO’s internal divides to BRICS expansion and regional realignments, states now pursue transactional partnerships driven by national interests. This fluid diplomacy creates both opportunities for middle powers and uncertainty in global governance.

Read More »
Afghan Taliban and Cross Border Terrorism in Pakistan

Afghan Taliban and Cross Border Terrorism in Pakistan

Pakistan is witnessing a sharp rise in terrorist attacks linked to the Afghan Taliban’s support for the Tehreek-e-Taliban Pakistan (TTP). A new study reveals that Afghan nationals now dominate TTP infiltration groups, exposing Kabul’s complicity in cross-border militancy. As violence escalates, Islamabad must balance border control, diplomacy, and de-radicalisation to counter

Read More »
The New Normal: End of Pakistan’s Strategic Restraint

The New Normal: End of Pakistan’s Strategic Restraint

Any hope surrounding the Pakistan–Afghanistan dialogue in Doha is colliding with renewed violence and mutual distrust. Pakistan’s recent precision strikes in Paktika, following a shattered ceasefire and terrorist attacks, signal a shift toward active defense. The talks now hinge on whether Kabul can curb militant sanctuaries and move beyond its victim narrative.

Read More »