IMF warns Sri Lanka trade unions against strike over pay demand

COLOMBO (AFP): Sri Lanka’s fragile economic recovery could be hampered by threatened trade union strikes over reduced benefits for government employees in this year’s budget, the International Monetary Fund warned on Tuesday.

Leftist President Anura Kumara Dissanayake’s maiden budget raised public sector salaries but also made deep cuts to longstanding perks in a continuing effort to repair the island nation’s tattered finances.

Sri Lanka’s main doctors’ union is considering a strike from Wednesday to protest against cuts to their allowances, while teachers are also considering stoppages.

IMF team leader Peter Breuer said the budget was the “last big push” for Sri Lanka’s austerity programme and said everyone who can “should make a sacrifice”.

“Sticking with the reforms is really the best way out for Sri Lanka to assure its sustainability,” Breuer told reporters.

“I think it’s important for everyone in Sri Lanka to recognise that,” he said. “This is the last budget where there is still a bit of an increase in revenues needed.”

Sri Lanka suffered an unprecedented economic crisis in 2022 that caused widespread shortages of food, fuel and other essentials.

The island nation secured a $2.9 billion bailout loan from the IMF in 2023, almost a year after defaulting on its $46 billion foreign debt.

Successive governments have since raised taxes and cut public spending to raise state revenue.

Breuer said the next year would be less painful, but the country must remain committed to economic reforms.

“This is the last big push,” he said. “Thereafter, it will be much easier going forward.”

The IMF released last week its fourth tranche of $334 million in its rescue package for Sri Lanka, commending the country for adhering to its economic reform pledges.

“Reforms in Sri Lanka are bearing fruit and the economic recovery has been remarkable,” IMF Deputy Managing Director Kenji Okamura said in a statement at the time.

“Inflation remains low, revenue collection is improving, and reserves continue to accumulate,” he said. “The recovery is expected to continue in 2025.”