Sri Lanka’s cabinet said on Tuesday it was seeking 6 per cent cuts to its 2023 current budget spending and seeking support from the International Monetary Fund (IMF) as the country faces its worst financial crisis in 70 years.
The cabinet also approved a proposal to defer the salaries of some government officials to manage public finances, cabinet spokesman Bandula Gunawardana told reporters.
“Sri Lanka has printed money in successive governments to bridge the gap between public revenue and spending, but the financial crisis and our attempts to get IMF support have constrained money printing, so the only option is to cut spending.” said. ” said Gunawardhana.
Sri Lanka will have to inject massively indebted public finances to unwind a $2.9 billion IMF loan agreed to in September.
“Talks with bilateral lenders, including India and China, for Sri Lanka’s debt restructuring are proceeding smoothly, and we hope to finalize the IMF’s support in the first quarter of 2023,” he added.
The Central Bank of Sri Lanka expects the Sri Lankan economy to record a gradual recovery from the second half of 2023 and continue its growth momentum beyond.