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IMF is a bandage, not a cure: Moving towards lasting solutions

Daily FT

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July 17, 2025

"The true test of leadership is not in securing another bailout, but in building a nation that never needs one again. Fiscal sovereignty is not a dream; it is a decision."

- By Prof. Asoka S. Seneviratne

IMF is a bandage, not a cure: Moving towards lasting solutions

Introduction: Understanding the IMF program without blaming

(Beyond bailouts: How Sri Lanka can break free from IMF dependency; policy lessons from Malaysia, Bolivia, Botswana, and Vietnam)

MORE people in Sri Lanka believe that the IMF's bailout has caused more hardship than it has provided help. For many, particularly working-class and lower-income groups, everyday life has become increasingly challenging due to higher taxes, job insecurity, rising living costs, and cuts to essential public services. Only a small number seem shielded from this suffering.

However, we must be clear-eyed about one critical fact: the IMF did not impose itself on Sri Lanka. The Government invited the IMF in 2022 because the country was in the midst of a historic economic collapse, having defaulted on its debt for the first time in history, with foreign reserves nearing zero and inflation spiralling out of control.

The IMF, as the lender of last resort, provides emergency financial support-but with strings attached. It does not give away its own money. It lends funds entrusted by other member countries and must ensure those loans are repaid with interest. That's why IMF loans always come with conditions fiscal discipline, structural reforms, and strict policy measures to safeguard repayment and prevent further collapse.

And that's where the real problem lies: the conditions imposed to stabilise the economy often end up hurting the very people they are meant to help.

The pain of reform-higher VAT, electricity price hikes, cuts in subsidies, privatisation-falls not on the elite or the corrupt, but on the everyday citizen.

MEER VERHALEN VAN Daily FT

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