Renegotiating with the IMF is a complex process that may not always be successful, despite political claims

Minister of Foreign Affairs and Justice, Prison Affairs & Constitutional Reform, President’s Counsel Ali Sabry emphasized the seriousness and lack of success in renegotiating with the International Monetary Fund (IMF).

The Minister pointed out that reopening negotiations with the IMF could put at risk the upcoming tranche in December, as well as future disbursements from the World Bank (WB) and the Asian Development Bank (ADB).

This could result in a loss of between USD 1.2 billion to 1.3 billion between December 2024 and January 2025, leading to further instability, Minister Ali Sabry cautioned.

Minister of Foreign Affairs and Justice, Prison Affairs & Constitutional Reform, President’s Counsel Ali Sabry, expressed these views during the news conference titled ‘Two Years of Progress and Advancement’, which took place at the Presidential Media Centre on 28th.

The Minister added,

In 2022, the Ministry of Foreign Affairs played a critical role given the challenging circumstances faced by the country. We had to rebuild strained foreign relations, regain trust from the international community, and utilize international relations to enhance the country’s economy.

After two and a half years of dedicated work, we have managed to stabilize the country successfully. Our international reputation now reflects the positive progress made domestically. It should be noted that President Ranil Wickremesinghe’s leadership was vital in achieving these outcomes.

Securing agreements with 17 countries for debt restructuring through international relations is a significant accomplishment for us. We have completed the debt restructuring process while upholding our foreign policy, local identity, and sovereignty. Our rapid recovery from the economic crisis has set a global example. Currently, countries like Pakistan, the Maldives, and Bangladesh are seeking our guidance on economic revitalization. President Ranil Wickremesinghe’s leadership in stabilizing the country has been acknowledged internationally.

Out of the five countries—Lebanon, Venezuela, Argentina, Zimbabwe, and Greece—that faced similar economic crises, only Greece has recovered so far, and it took them 12 years. Sri Lanka stands out as the only country to overcome an economic crisis within a short period.

Nevertheless, some individuals are advocating for renegotiations with the International Monetary Fund for narrow political goals. To those considering embarking on this challenging and often fruitless renegotiation process, I wish them “good luck.”

In March 2022, we officially expressed interest in applying for an extended-fund facility. We received the first tranche in March 2023, after a year of agreeing on the Debt Sustainability Analysis (DSA).

The DSA is based on five key parameters. The current national debt, at 133% of Gross Domestic Product (GDP), must be reduced to 95%. Additionally, the current payment of the GDP for foreign loan settlement, which is 9.3%, needs to be reduced to 4.5%.

Furthermore, the primary budget balance should achieve a surplus of 2.1%. Also, tax revenue should constitute 15% of GDP. These targets are now legally established and not easily changed. Any attempt to modify them would require renegotiation, taking at least another year.

If this were to happen, the IMF would likely withhold the next USD 400 million tranche due in December. Consequently, the WB and ADB would also withhold their tranches, leading to a loss of USD 1.2 billion to 1.3 billion between December and January. This loss would make it difficult to prevent the country from destabilizing again, potentially leading to currency devaluation and increased inflation.

The Ministry of Foreign Affairs has embarked on various initiatives to support and coordinate the country’s economic recovery. Additionally, it has played a key role in advancing Global South priorities in multilateral forums at the Ministerial level and effectively addressing challenges related to multilateral human rights issues. It is worth noting that Sri Lanka has been elected to four United Nations mechanisms: the Committee on the Elimination of Discrimination against Women for 2022-2024, the Committee on the Protection of the Rights of Migrant Workers and Members of Their Families, the UNESCO Executive Board for 2023-2027, and the Economic and Social Council for 2025-2027.

Our foreign policy was recently evaluated in an article by ForeignPolicy.com, highlighting that despite the global power dynamics, small sovereign states like Sri Lanka have been significantly affected. Sri Lanka, however, has managed this situation well, maintaining strong relations with major powers.

This success is not coincidental and is largely attributed to President Ranil Wickremesinghe’s knowledge, understanding, experience, and personal connections. He is the only leader in the country capable of directly engaging with any country’s head of state.

It is also crucial to recognize the President’s directive to uphold the independence of the Foreign Service. As a result, the Foreign Service now operates with greater autonomy and without political interference, surpassing the independence achieved during former Minister Lakshman Kadirgamar’s tenure.

State Minister of Foreign Affairs Tharaka Balasuriya,

Through negotiations with Myanmar and Thailand, we have successfully secured the release of 28 out of the 55 Sri Lankans detained in Myanmar for Cyber-Crimes. Efforts are ongoing to secure the release of the remaining individuals promptly.

Furthermore, we have facilitated the return of around 70 retired war heroes who had joined the Russian army and ensured they receive their entitled benefits.

The Ministry of Foreign Affairs has also worked on repatriating Sri Lankans who, after traveling to countries like Dubai and Oman on tourist visas, found themselves in distressing situations.

Effective foreign policy is essential for these activities, and having a competent team is crucial. President Ranil Wickremesinghe has ensured that our Ministry can engage this team in Foreign Service free from political influences, allowing us to fully utilize the country’s foreign policy.

A group of officials, including Secretary of the Ministry of Foreign Affairs Aruni Wijewardena and several other officials, participated in the event.