IMF Warns Sri Lankan Trade Unions Against Strike Amid Economic Recovery Efforts
The International Monetary Fund (IMF) issued a cautionary message to Sri Lanka’s trade unions on Tuesday, warning that threatened strikes over reduced government employee benefits could derail the country’s fragile economic recovery.
The warning comes as unions consider protests against budget cuts, which aim to address the nation’s lingering financial woes.
Sri Lanka’s new leftist President, Anura Kumara Dissanayake, has faced a delicate balancing act in his inaugural budget, which not only increased public sector salaries but also implemented significant cuts to long-standing perks.
These measures are part of a larger strategy to restore Sri Lanka’s battered finances after an unprecedented economic crisis in 2022, which saw the nation grapple with severe shortages of food, fuel, and other basic necessities.
However, the budget cuts have sparked resistance, particularly among key public sector groups. The Doctors’ Union is considering a strike starting Wednesday in response to cuts to their allowances, while teachers are also threatening industrial action.
Peter Breuer, IMF team leader for Sri Lanka, described this year’s budget as the “final big push” in the country’s ongoing austerity program. He emphasized that sacrifices were necessary from all sectors of society to ensure long-term economic stability.
“Staying the course with these reforms is the best path forward for Sri Lanka’s future sustainability,” Breuer told reporters, urging the public to understand the necessity of these measures.
Sri Lanka’s economy plunged into chaos in 2022, culminating in the country defaulting on its $46 billion foreign debt. The IMF stepped in with a $2.9 billion bailout loan in 2023, and since then, the government has implemented austerity measures, including raising taxes and reducing public spending, in an effort to stabilize the economy.
Breuer expressed optimism about the future, noting that the next year would likely bring less hardship for Sri Lankans if they remained committed to the reform process. “This is the last major push,” he said. “After this, the path forward will be much smoother.”
In a show of support for Sri Lanka’s ongoing reforms, the IMF recently released the fourth tranche of its $334 million bailout package, praising the country’s adherence to its reform commitments. IMF Deputy Managing Director Kenji Okamura commended Sri Lanka’s progress, noting that the country has made significant strides in improving revenue collection, maintaining low inflation, and rebuilding foreign reserves.
“The recovery is impressive, and we expect this positive momentum to continue into 2025,” Okamura said.
Despite the IMF’s optimistic outlook, the road ahead for Sri Lanka remains challenging. While the nation has made substantial progress, trade unions and the public’s patience will be key in ensuring that Sri Lanka’s recovery continues without disruption.
