Sri Lanka’s newly elected President Anura Kumara Dissanayake announced plans to resume discussions with the International Monetary Fund and foreign creditors to navigate the country out of its most severe economic crisis on record. Dissanayake expressed intentions to engage in talks regarding debt restructuring and swiftly finalize the process to secure the necessary funds.

The future of the economic recovery strategy devised by former President Ranil Wickremesinghe was cast into uncertainty following Dissanayake’s victory in the presidential election. Dissanayake, a Marxist, campaigned on promises to renegotiate the IMF bailout agreement previously established under Wickremesinghe’s leadership, with a focus on making austerity measures more manageable for lower-income individuals.

In response to a financial meltdown, Sri Lanka declared bankruptcy in 2022 and halted repayments on approximately $83 billion in domestic and foreign debts. The country faced dire consequences including critical shortages of essential commodities such as food, medicine, fuel, and gas, as well as prolonged power outages.

Although Wickremesinghe cautioned that altering the fundamentals of the agreement could impede the release of a vital fourth tranche totaling almost $3 billion from the IMF package, which is crucial for ensuring economic stability. Leading up to the election, Wickremesinghe’s administration tentatively agreed to restructure Sri Lanka’s foreign debt.

Despite his pre-election pledges, Dissanayake seems inclined towards maintaining the IMF agreement largely unchanged, as indicated by his decision to retain key figures such as the governor of the Central Bank and the finance ministry secretary, who were instrumental in executing the reform program.

The economic turmoil in Sri Lanka triggered a political crisis that resulted in the resignation of then-President Gotabaya Rajapaksa in 2022. Subsequently, the parliament elected former Prime Minister Wickremesinghe as his replacement. Under Wickremesinghe’s leadership, the country saw economic stabilization, reduced inflation, a strengthened local currency, and increased foreign reserves. However, his electoral defeat is perceived as a public rejection of the established leadership held responsible for the financial crisis.