Sri Lanka bailout conditional on tackling corruption: IMF

Sri Lanka must not allow entrenched corruption to undermine a bailout for its bankrupt economy, the International Monetary Fund (IMF) said yesterday after signing off on a $3 billion loan for the crisis-hit nation.

The IMF approved its long-delayed rescue program on March 20 after China, the South Asian nation's biggest bilateral lender, offered debt relief assurances.

But the Fund said the rescue was conditional on tackling the deep-rooted culture of graft and government mismanagement blamed for tipping Sri Lanka into an unprecedented economic crisis last year.

Peter Breuer, the IMF mission chief in Sri Lanka, said the government had agreed to enact tougher anti-corruption laws within months during the bailout negotiations.

"We emphasize the importance of anti-corruption and governance reforms as a central pillar of the program," he told reporters.

"They are indispensable to ensure the hard-won gains from the reforms benefit the Sri Lankan people."

Breuer said Sri Lanka would become the first Asian economy to be subject to a comprehensive "governance diagnostic exercise" by the IMF.

Sri Lanka went to the Washington-based lender of last resort shortly before defaulting on its $46 billion foreign debt last April.

A critical shortage of foreign exchange had left the island nation unable to finance even the most essential imports, causing severe food and fuel shortages.

Sri Lanka's 22 million people also endured runaway inflation and prolonged blackouts, inflaming public anger as the crisis worsened.

Huge protests against economic mismanagement and government corruption eventually forced then-president Gotabaya Rajapaksa to flee the country and resign in July.

Rajapaksa belongs to a powerful...