Sri Lanka’s president has said that the International Monetary Fund (IMF) has approved its request for a $2.9bn bailout and the country’s presidency said the programme will enable it to access up to $7bn in overall funding.
The IMF’s board confirmed it has signed off on the loan, which clears the way for the release of funds and kicks off a four-year programme designed to shore up the country’s economy.
The decision will allow an immediate disbursement of about $333m, the IMF said, and will spur financial support from other partners, potentially helping Sri Lanka emerge from its worst financial crisis in decades.
But IMF Managing Director Kristalina Georgieva warned that Colombo must continue pursuing tax reform and greater social safety nets for the poor – and rein in the corruption that has been partly blamed for the crisis.
“I express my gratitude to the IMF and our international partners for their support as we look to get the economy back on track for the long term through prudent fiscal management and our ambitious reform agenda,” Sri Lanka’s President Ranil Wickremesinghe said in a statement on Monday.
The country defaulted on its foreign debt in April 2022 as it plunged into its worst economic downturn since independence because of a major shortage of foreign currency reserves.
The Indian Ocean nation of around 22 million people ran out of cash to finance even the most essential imports, leading to widespread social unrest.
Mass protests over economic mismanagement, acute shortages of food, fuel and medicines, and runaway inflation forced President Gotabaya Rajapaksa to flee the country and resign in July.
Rajapaksa was replaced by President Wickremesinghe, who has implemented tough spending cuts and tax hikes in an attempt to secure IMF assistance.
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IMF staff had provisionally approved the bailout in September, but the final green light was held up until China, the island’s biggest bilateral lender, agreed to restructure its loans to Colombo.
Beijing had said this year that it was offering a two-year moratorium on its loans to Sri Lanka, but the concession fell short of IMF expectations for the sustainability of the island’s debt.
Wickremesinghe had said after China agreed to restructure its loans that he expected the first tranche of the IMF package would be made available within the month.
Earlier on Monday, Wickremesinghe’s office said he was seeking a 10-year moratorium on Sri Lanka’s foreign debt as the country was out of foreign reserves to service its loans.
Officials involved in the negotiations said the terms of debt restructuring must be finalised and agreed upon by all parties before June, when the IMF is expected to review the bailout programme.
Wickremesinghe’s office said in a statement that the IMF programme will help improve the country’s standing in international capital markets, making it attractive for investors and tourists.
Wickremesinghe told the country’s parliament earlier that there were signs the economy was improving, but there was still insufficient foreign currency for all imports, making the IMF deal crucial so other creditors could also start releasing funds.
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Call to tackle corruption
Colombo is also banking on the IMF deal to unfreeze billions of dollars in foreign aid for projects suspended since Sri Lanka defaulted on its loans last year.
The government has already doubled taxes, increased energy tariffs threefold and slashed subsidies in an effort to meet the preconditions of the IMF bailout.
The austerity measures have also led to strikes that halted the health and logistics sectors last week. Wickremesinghe has said he had no alternative but to go with an IMF programme.
Georgieva said Sri Lanka must stick with its controversial tax reforms, manage government expenditure and do away with energy subsidies.
In a statement, she said that “the momentum of ongoing progressive tax reforms should be maintained, and social safety nets should be strengthened and better targeted to the poor”.
She also urged Colombo to tackle endemic corruption.
“A more comprehensive anti-corruption reform agenda should be guided by the ongoing IMF governance diagnostic mission that conducts an assessment of Sri Lanka’s anti-corruption and governance framework,” she said.
Sri Lanka’s economy shrank by a record 7.8 percent last year as it grappled with its worst foreign exchange shortage since independence from Britain in 1948.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
