On 20 March, the International Monetary Fund announced its approval of an Extended Fund Facility to Sri Lanka.
The facility – which amounts to USD 2.9 billion in financial support, to be disbursed in tranches over the next four years –- marks the 17th occasion the island nation has gone to the IMF for help. The Sri Lankan government expects the bailout and its attendant structural reforms to boost confidence in the country's economy, and to unlock funding of up to USD 7 billion from other sources. The hope is that the IMF deal will revive the country's economic prospects and encourage global capital markets and foreign investors who had fled the country to return.
Since last April, when Sri Lanka declared sovereign default, the country has gone through one crisis after another. The domestic dimensions of the crisis, including its economic aspects, have been widely covered, and there has been a flurry of debate over the exact economic reforms that should be enforced by the Sri Lankan government – now led by an unelected and deeply polarising president.
In comparison, there has been very little analysis of how the crisis has altered the island's foreign policy, even though Sri Lanka has experienced massive shifts on this front in the last six months. These shifts have come about in the face of the IMF bailout, an arrangement that has pushed the government closer to the West and India, while maintaining its ties with China. Certain analysts, including local economists, have pointed out that the agreement with the IMF has become "an international issue."