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Sri Lanka unions stage strike to protest against IMF bailout plan

Public sector workers are demanding that the government reverse high taxes as a condition of unlocking a $2.9 billion IMF loan.

Thousands of workers in hospitals, schools and railways across Sri Lanka have gone on strike to protest the high cost of living, including increased taxes being imposed as a condition of an International Monetary Fund (IMF) bailout, amid the worst financial crisis in the country in decades.

Schools canceled term tests on Wednesday and hospital outpatient clinics closed due to the public sector work stoppage involving more than 40 unions. Fewer vehicles were seen on the roads.

Dockers at the main seaport in Colombo stayed away as air traffic controllers joined the combined industrial action to carry out a “go slow” for two hours, affecting at least 14 international flights.

“All in all, our work to govern took two hours, but we will consider a full strike if the government does not reverse the new tax rates,” Rajitha Seneviratne, secretary of the air traffic controllers’ association, said. AFP.

Armed soldiers were deployed at train stations and ports as the government attempted to restore minimum services. Dock workers had a tense standoff with the military at the port, but there were no reports of clashes.

President Ranil Wickremesinghe’s office said 20 trains were running to bring office workers to the capital, but unions said it was less than five percent of daily services.

State buses were also running, the president’s office said, but few were on the road, while attendance at schools, offices and factories had plummeted.

The strike came despite a ban imposed by Wickremesinghe last month and warnings that violators could lose their jobs.

Union spokesman Haritha Aluthge said talks with authorities ended inconclusively overnight, forcing them to continue with Wednesday’s work stoppage.

Professionals have also joined the unions to protest against the sharp increase in income tax since January.

“Anyone who violates the order for essential services will face the full force of the law,” cabinet spokesman Bandula Gunawardana warned ahead of the nationwide action.

Unions say the length of the strike will depend on the government’s response to their demand to roll back the new taxes, which were one of the measures taken to qualify for a $2.9 billion bailout package of the IMF. Protesters are also demanding that the government lower record high interest rates and cut electricity rates.

Sri Lanka suffers from hunger, increasing poverty and shortages of basic necessities (File: Eranga Jayawardena/AP)

Bailout is expected next week

The board of directors of the Washington-based lender will make a decision on Sri Lanka on March 20 and is widely expected to release the first term of the loan with nine tranches spread over four years.

Officials involved in the negotiations said the IMF had been closely monitoring protests and social unrest since the tax reforms.

“Sri Lanka is at a very sensitive point and it is important that the public understands and supports that,” cabinet spokesman and transport minister Bandula Gunawardane told a weekly briefing on Tuesday.

“If government revenues improve, the public sector will be the first beneficiaries of any aid.”

Sri Lanka formally sought help from the IMF on March 18 last year after it defaulted on its $46 billion external debt in mid-April.

The government last week received assurances from China, the largest single bilateral creditor, that it was ready to restructure its loans to the South Asian nation and clear the last hurdle to IMF bailout.

In an open letter to Sri Lanka’s creditors on Tuesday evening, Wickremesinghe stressed that all creditors would be treated equally after concerns that China could get a better deal.

“We reiterate our commitment to equal treatment of all our external creditors, with a view to overall fair burden sharing across all restructured debts,” he said.

The unprecedented economic crisis in Sri Lanka since late 2021 has led to severe shortages of food, fuel and medicines. It sparked months of protests that led to the impeachment of President Gotabaya Rajapaksa last July.