Sri Lanka Enacts Anti-Corruption Law to Meet IMF Bailout Terms, Ease Crisis

Sri Lanka's Parliament Passes Anti-Corruption Bill as Part of IMF Bailout Agreement

COLOMBO, Sri Lanka — Sri Lanka's Parliament has passed a new anti-corruption bill aimed at strengthening national governance and meeting international standards, as part of a broader effort to recover from an unprecedented economic crisis. The legislation, enacted in compliance with a $2.9 billion bailout agreement with the International Monetary Fund (IMF), seeks to align Sri Lanka’s legal framework with the United Nations Convention Against Corruption (UNCAC).

The crisis, which peaked in mid-2022, was triggered by years of economic mismanagement, political corruption, and delayed reforms. Inflation soared past 50 percent, and nearly a quarter of the population—4.9 million people—faced food insecurity. The country defaulted on its foreign debt for the first time in May 2022, plunging it into its worst economic downturn in over seven decades.

Since securing the IMF bailout in March 2023, Sri Lanka has made progress in stabilizing its economy. Essential goods such as food, fuel, and medicine, once scarce, are now more accessible. Public transportation, halted due to fuel shortages, has resumed operations. However, the country still grapples with over $80 billion in debt, and recovery remains fragile.

The new anti-corruption bill is a key requirement of the IMF’s Extended Fund Facility, which provides nearly $3 billion in aid over four years—the 17th such arrangement since Sri Lanka’s independence. Among the IMF’s strict conditions are demands for progressive tax reforms, financial supervision enhancements, and a governance diagnostic exercise to assess corruption levels.

Economic missteps, including sweeping tax cuts in 2019 and a sudden ban on synthetic fertilizers in 2021, exacerbated the crisis. The fertilizer ban slashed rice production by 20 percent and nearly halved tea exports, straining trade and foreign reserves. Fuel shortages led to prolonged power cuts and business closures, deepening hardship for citizens.

The political turmoil culminated in July 2022 when then-President Gotabaya Rajapaksa fled the country amid mass protests. His successor, President Ranil Wickremesinghe, assumed office and swiftly moved to suppress demonstrations. A July 22, 2022, crackdown by security forces resulted in detentions and injuries, drawing condemnation from human rights groups.

Despite these challenges, Sri Lanka has taken steps toward reform. The new anti-corruption law establishes a stronger Bribery and Corruption Commission, though critics argue its effectiveness will depend on enforcement. Transparency International Sri Lanka welcomed the bill’s provisions but emphasized the need for robust implementation.

The crisis’s human toll remains severe. Over four million Sri Lankans still face food insecurity, with many families forced to reduce meals or skip them entirely. Rising utility costs, including electricity bills that have surged from 180 to 1,445 rupees in one household, leave little income for food. Malnutrition rates have climbed, particularly among children, with limited access to protein, dairy, and fresh produce.

The IMF’s first $333 million tranche was disbursed in March 2023, offering a lifeline to Sri Lanka’s battered economy. President Wickremesinghe hailed the funds as proof of the country’s potential to restructure debt and restore normalcy. Yet, the road to recovery is long, with structural reforms requiring time to yield results.

As Sri Lanka moves forward, the success of its anti-corruption measures and economic policies will determine whether it can emerge from crisis—or remain trapped in a cycle of debt and instability.