NPP’s Strategy: Securing better deal with IMF, but no exit – AKD

By Rathindra Kuruwita

The National People’s Power (NPP) intended to secure a better deal with the International Monetary Fund (IMF) regarding the debt sustainability analyses (DSAs). However, if the renegotiation process dragged on or proved costly, the party would adhere to the existing DSA, NPP presidential candidate Anura Kumara Dissanayake said on Monday (16) during an Ada Derana political programme.

Dissanayake highlighted three salient points the NPP was planning to address. The first concern was increasing spending on social welfare. The IMF had set several parameters for Sri Lanka to achieve such as raising tax revenue to 15 percent of GDP, maintaining a primary surplus of 2.3 percent of GDP from 2025, and reducing the public debt-to-GDP ratio to below 95 percent by 2032.

“We are not opposed to economic targets,” Dissanayake said. “But while striving to meet these objectives, our small and medium enterprises collapsed, and living standards declined. We must consider the social impact of pursuing economic goals. We need to engage the IMF about social spending.”

He emphasised that only the NPP had openly declared that participation in rallies or canvassing for the party did not qualify one for government jobs or state subsidies. “We can say this because those working with us are motivated by social objectives rather than personal gain. When I mentioned tax cuts, many asked, ‘Can we afford this?’

People are no longer seeking subsidies; they want meaningful change,” he added.

The second issue the NPP seeks to discuss with the IMF, according to Dissanayake, is the proposed mechanisms to combat bribery and corruption. “We want to explain that laws and mechanisms alone are insufficient. Practical measures are needed to enforce these regulations, and we will require IMF assistance for that,” Dissanayake noted.

The NPP intended to negotiate with the IMF debt optimisation, questioning whether reducing the public debt-to-GDP ratio to below 95 percent by 2032 is an ideal target. “In Greece, this figure was adjusted after discussions with the IMF, and it’s crucial as debt restructuring negotiations rely on it. These are the three areas we are planning to discuss with the IMF,” he said.

Dissanayake also remarked that the DSA was formulated with inputs from Sri Lanka and questioned the accuracy of those contributions. He mentioned that Sri Lanka had already conducted negotiations with bilateral and commercial creditors based on the current DSA, setting the projected debt-to-GDP ratio at 95 percent by 2032. Agreements have been made with the Paris Club and Exim Bank.

“Some people wonder whether we would have to start from scratch if an alternative DSA is negotiated. We have an agreement on the policy framework with bilateral creditors, though not a final one. We believe there’s still room for quick negotiation, as there’s no final deal with ISB holders either,” Dissanayake explained.

He stressed that the IMF was concerned not only with Sri Lanka meeting set targets but also with achieving overall debt sustainability. “We are not coming into power to destabilise the country, but to develop it. If renegotiations with the IMF take too long and agreements fall through, we may have to stick to the current programme. Our approach is to work with the IMF to secure a better deal, not to withdraw from it,” he clarified.

The NPP will have to govern a country that had entered into an agreement with the IMF, Dissanayake said, adding that there are no alternative routes for debt restructuring. “We have put all our eggs in the IMF basket, and discarding it would be irresponsible. We must try, and I believe we can renegotiate. However, if the costs and time required are too high, we will stick with the current programme,” he stated.