IMF bailout not a silver bullet for Sri Lanka, warns Moody’s Analytics

Sri Lanka has a difficult road ahead irrespective of how much funding it receives from multilateral and global financial agencies, a senior economist at Moody’s Analytics told Reuters on Tuesday.

Moody’s Analytics is independent of Moody’s Investors Service, the rating agency.

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The International Monetary Fund (IMF) approved a nearly $3 billion bailout for Sri Lanka on Monday and the country’s presidency said the programme will enable it to access up to $7 billion in overall funding.

“It (the IMF support) is definitely not like the silver bullet they think,” said Katrina Ell, senior economist at Moody’s Analytics.

“The exuberance that has been reflected in the financial markets will really fade unless we see some significant improvements from the government as also in Sri Lanka’s growth prospects”.

The economist said all additional funding that the country receives in coming months is good news but fiscal prudence and debt sustainability will be key.

“We need to keep in mind that it’s still going to be a difficult road no matter how much potential funds or support is being thrown at Sri Lanka,” Ell said.