Sajith warns Sri Lanka risks renewed bankruptcy without successor IMF deal

Opposition Leader Sajith Premadasa has warned that Sri Lanka could face a renewed risk of bankruptcy unless the Government urgently pursues a successor agreement with the International Monetary Fund (IMF), cautioning against what he described as “arrogance” in economic decision-making.

Addressing a meeting at the Samagi Jana Balawegaya (SJB) headquarters to initiate discussions on forming the party’s Teachers’ Union, Premadasa said Government claims that the economy was stable did not fully reflect the realities shown by available economic indicators.

He noted that while President Anura Kumara Dissanayake had stated that foreign reserves stood at around $ 7 billion, a portion of the reserves consisted of Chinese yuan holdings that were not freely usable.

Premadasa argued that the country’s effective reserve position was therefore lower than officially presented.

“International benchmarks require reserves sufficient to cover at least three months of imports, and Sri Lanka is currently unable to meet that threshold,” he claimed.

With Sri Lanka’s monthly import bill estimated at around $ 2 billion, he said existing reserves remained below the minimum level required to ensure external sector stability.

Premadasa also warned that rising geopolitical tensions in the Middle East could create fresh economic risks for Sri Lanka.

He pointed out that although workers’ remittances had risen to around $ 8 billion, any escalation of conflict in the region could negatively affect migrant employment and reduce inflows.

Premadasa also claimed that countries such as India, which supported Sri Lanka during the COVID-19 pandemic and the 2022 economic crisis, may now have limited capacity to extend further assistance due to their own domestic economic priorities.

He also contrasted Sri Lanka’s public communication strategy with India’s, stating that Indian leaders had been more transparent in informing citizens about economic conditions.

Referring to fuel prices, Premadasa noted that petrol prices, which had climbed to around Rs. 470 during the 2022 crisis, were currently around Rs. 410, urging the public to view such figures within the broader economic context.

He warned that Sri Lanka’s current IMF program is scheduled to conclude in March 2027, cautioning that the expiry of the arrangement could negatively affect the country’s credit ratings and financial stability.

Premadasa said foreign debt repayment obligations were expected to increase significantly from 2028 onwards, placing additional pressure on foreign exchange reserves alongside import financing needs.

He stressed that Sri Lanka needed to secure a successor IMF program to avoid another balance of payments crisis, particularly if global oil prices rise further. 

“Without adequate foreign currency inflows from exports and remittances, the country could again face a balance of payments crisis,” he warned.

Premadasa urged the Government to adopt what he described as a “people-centred IMF program” while ensuring greater transparency in communicating economic realities to the public.

He also criticised the administration for failing to convene an international donor conference during earlier stages of the economic crisis despite repeated calls to do so.

The Opposition Leader called on authorities to move quickly on negotiations for a successor IMF arrangement and prioritise long-term economic stability over political considerations.