COLOMBO: Sri Lanka’s cabinet has approved a new economic law that will cover key targets set by the International Monetary Fund (IMF), the cabinet spokesperson said on Tuesday.

Sri Lanka plunged into its worst financial crisis in more than seven decades after its foreign exchange reserves sank to record lows in 2022 pushing the country to default on its foreign debt.

But the island nation has seen its economy improve after a $2.9 billion bailout was approved by the IMF last April and is expected to grow by 3% this year.

The new Economic Transformation bill will legalise multiple targets set under the IMF programme, including a goal to reduce the debt to gross domestic product (GDP) ratio to 95% by 2030, and reduce debt servicing costs to 4.5% of GDP, the spokesperson said.

Sri Lanka extends restrictions on outward remittances by 6 months

“This law is to ensure that Sri Lanka continues on this path to recover from the crisis and also implement larger reforms to grow consistently,” Cabinet spokesman and Transport Minister Bandula Gunawardana told reporters at the weekly Cabinet briefing.

Sri Lanka will hold its presidential elections before mid-October and opposition parties have said they could relook current government policies on taxation and IMF programme targets if they win.

The bill will be presented to parliament for approval in the coming months, Gunawardana said.