COLOMBO – Crisis-hit Sri Lanka’s Parliament Thursday (8) approved President Ranil Wickremesinghe’s 2023 budget, vital to raising government revenue and securing a twice-delayed IMF bailout.

The island nation has been reeling from more than a year of severe shortages and runaway inflation, prompting protests that ousted Wickremesinghe’s predecessor Gotabaya Rajapaksa in July.

Parliament voted overwhelmingly to sign off on Wickremesinghe’s plan to raise overall tax revenue by nearly 70% and privatize loss-making state enterprises after a month-long debate.

Wickremesinghe, a six-times prime minister, has already sharply raised taxes and increased fuel, water and electricity tariffs and rationed petrol and diesel in a bid to stabilize the economy.

His moves followed the government declaring bankruptcy in mid-April and defaulting on its $46-billion foreign debt for the first time since independence from Britain in 1948.

But the main opposition said Wickremesinghe’s first full budget was unrealistic and warned that the economic crisis could worsen next year.

“This is a failed budget,” opposition legislator Eran Wickramaratne said on Thursday. “The numbers in the budget are unrealistic.”

The budget expects a 69% increase in tax revenue next year and projects a narrowing of the budget deficit to 7.9% of GDP in 2023, down from 9.8% this year.

The central bank had initially expected a $2.9-billion bailout from the International Monetary Fund to materialise by August.

The bank later said it hoped a deal could be concluded by early December, but now say talks could drag onto early next year.

An agreement with all external creditors, including China which accounts for 52% of Colombo’s bilateral debt, is a pre-condition to drawing down any IMF support.

Beijing has made no public statements on Colombo’s pleas to “restructure,” a euphemism for a debt haircut, but officials say talks are still underway.

Japan and India are the other two major bilateral creditors owning 19.5% and 12% of Sri Lanka’s bilateral debt respectively.

Much of the foreign debt is in international sovereign bonds (ISBs) held by private investors and talks with them are also ongoing, officials said adding that a deal was yet to be struck.

The IMF has said Sri Lanka’s foreign debt must be “sustainable” to unlock any new external funding and the country should also restructure its myriad loss-making state enterprises.

Wickremesinghe has proposed the sale of the country’s loss-making national carrier, Sri Lankan airlines, and several other entities to raise foreign exchange and boost the country’s external reserves.

Official figures show that major state businesses, including Sri Lankan airlines, lost $2.38 billion in the first four months of this year alone.

The World Bank has warned that the economy could shrink by 9.2% this year, worse than the 8.7% contraction the central bank of Sri Lanka had forecasted.

– Agence France-Presse