Sri Lanka secures $3B IMF bailout to help salvage bankrupt economy | Canada News Media
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Sri Lanka secures $3B IMF bailout to help salvage bankrupt economy

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The International Monetary Fund (IMF) said Monday that its executive board has approved a nearly $3 billion US ($4.1 billion Cdn) bailout program for Sri Lanka over four years to help salvage the country’s bankrupt economy.

An IMF statement said about $333 million US ($455 million Cdn) of the funding will be disbursed immediately and the approval will also open up financial support from other institutions.

“Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities,” the IMF statement quoted managing director Kristalina Georgieva as saying.

“Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.”

The office of Sri Lanka’s president said the IMF approval will unlock financing of up to $7 billion ($9.6 billion Cdn) from the fund and other international multilateral financial institutions.

How Sri Lankans are coping with political and economic turmoil

 

CBC’s Salimah Shivji gives an inside look at how the political and economic unrest in Sri Lanka is hurting everyday people.

Earlier this month, the last hurdle for the approval was cleared when China joined Sri Lanka’s other creditors in providing debt restructuring assurances.

“From the very start, we committed to full transparency in all our discussions with financial institutions and with our creditors,” president Ranil Wickremesinghe said in a statement from his office. “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.”

Wickremesinghe said he has made some tough decisions to ensure stability, debt sustainability and to grow an inclusive and internationally attractive economy.

Sri Lanka increased income taxes sharply and removed electricity and fuel subsidies, fulfilling prerequisites of the IMF program. Authorities must now discuss with Sri Lanka’s creditors on how to restructure its debt.

People shout slogans and hold up signs during a protest against the Sri Lankan government increasing income tax in Colombo on Feb. 22. (Eranga Jayawardena/The Associated Press)

“Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported program,” Georgieva said.

“The authorities’ commitments to transparently achieve a debt resolution, consistent with the program parameters and equitable burden sharing among creditors in a timely fashion, are welcome,” she said.

Currency crisis

Sri Lanka announced last year that it is suspending repayment of its foreign debt amid a severe foreign currency crisis, because of a fall in tourism and export revenue due to the COVID-19 pandemic, mega projects funded by Chinese loans that did not generate income and releasing foreign currency reserves to hold the exchange rates for a longer period.

The currency crisis created severe shortages of some foods, fuel, medicine and cooking gas leading to angry street protests that forced then-president Gotabaya Rajapaksa to flee the country and resign.

Since Wickremesinghe took over, he has managed to reduce shortages and ended hours-long daily power cuts. The Central Bank says its reserves have improved and the black market no longer controls the foreign currency trade.

However, Wickremesinghe’ s government is likely to face hostility from trade unions over his plans to privatize state ventures as part of his reform agenda and public resentment may increase if he fails to take action against the Rajapaksa family, who people believe were responsible for the economic crisis.

Wickremesinghe’s critics accuse him of shielding the Rajapaksa family, who still control a majority of lawmakers in Parliament, in return for their support for his presidency.

 

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Minimum wage to hire higher-paid temporary foreign workers set to increase

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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

The Canadian Press. All rights reserved.

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PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Statistics Canada says levels of food insecurity rose in 2022

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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