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The International Monetary Fund (IMF) on Monday said its executive board approved a nearly $3 billion bailout for Sri Lanka, and the country's presidency said the program will enable it to access up to $7 billion in overall funding.

The decision will allow an immediate disbursement of about $333 million, the IMF said, and will spur financial support from other partners, potentially helping Sri Lanka emerge from its worst financial crisis in over seven decades.

IMF Managing Director Kristalina Georgieva said Sri Lanka also needs to undertake various reforms.

"For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical," Georgieva said in a statement. EFF refers to the IMF's Extended Fund Facility.

She emphasised the need for "ambitious revenue-based fiscal consolidation."

"For the fiscal adjustments to be successful, sustained fiscal institutional reforms on tax administration, public financial and expenditure management, and energy pricing are critical," Georgieva said in the statement.

Sri Lanka President Ranil Wickremesinghe's office said in a statement that the IMF program will help improve the country's standing in international capital markets, making it attractive for investors and tourists.

Wickremesinghe told the country's parliament earlier that there were signs the economy was improving, but there was still insufficient foreign currency for all imports, making the IMF deal crucial so other creditors could also start releasing funds.

The island nation aims to announce a debt-restructuring strategy in April and step up talks with commercial creditors ahead of an IMF review of a bailout package in six months, its central bank governor told Reuters earlier this month. (Reuters)

When Ranil Wickremesinghe took over as Sri Lanka's president in July after a popular uprising ousted his predecessor, the South Asian island nation was engulfed in its worst economic meltdown in 75 years.

Since then, Wickremesinghe has managed to a keep a lid on mass protests, improve supplies of essentials and on Monday, secured a nearly $3 billion bailout from the International Monetary Fund (IMF) that opens the door to restructuring about $58 billion of debt and receive funding from other lenders.

He has done that despite a deeply unpopular government, his own party commanding just one seat in the 225-member parliament and having to rely for support on the party of the man he replaced.

Hours-long power cuts and queues for fuel that led to the downfall of former President Gotabaya Rajapaksa are gone, thanks partly to a fuel rationing system. Tourists are returning, remittances are recovering and foreign exchange reserves are rising, though the economy is still contracting.

But due largely to significant hikes in income taxes and power tariffs that were needed to get the IMF on board, the government of the 73-year-old is no favourite of the people.

According to a "Mood of the Nation" poll run in February by private think-tank Verité Research, the government's approval rating was 10%, the same as in October but higher than an all-time low of 3% in June, when Rajapaksa was in power. Only 4% were satisfied with the way things were going in Sri Lanka, down from 7% in October but higher than 2% in June.

There are no known approval ratings for Wickremesinghe as president.

"He's ready to face the people's anger in the short term, to ensure long-term stability and growth in the country," said Dinouk Colombage, Wickremesinghe's director of international affairs.

"Even though the president only has one seat in parliament, him carrying forward his agenda, bringing forth the reforms, once the results start showing, I think the people will come out in open support of him."

Born into a prominent family of politicians and business-people with large interests in the media, the lawyer and six-time prime minister has little support beyond wealthy urban voters. His ability to make policy depends to a great extent on the support of the Sri Lanka Podujana Peramuna party, largely controlled by the Rajapaksa family.

For now, Wickremesinghe is enjoying that support, and he said on Sunday that his country was on the right track.

"There's fuel now, there's electricity, there's fertiliser and by April, there will be enough rice and other foodstuff," he said at an event in Colombo.

"We will no longer be declared a bankrupt nation, but a nation that can restructure its debts."

The bailout is expected to catalyse additional external support, with funding expected from the World Bank and the Asian Development Bank to the tune of $3.75 billion, the IMF said in a statement.

APOLOGY WHERE NEEDED

In recent months, Wickremesinghe successfully negotiated economic support from top lenders China, India and Japan, culminating in the IMF bailout.

He flew to Japan in October to apologise for the cancellation of Japanese-funded projects under Rajapaksa, which convinced Tokyo to back Sri Lanka's request for the IMF bailout.

The Paris Club of creditors, which includes Japan, earlier this year gave financing assurances to support the IMF deal.

A Japan-funded $1.8 billion light-railway project, which was suspended in 2019, is among infrastructure projects that Sri Lanka is now trying to restart.

But Sri Lanka still needs to renegotiate its debt, a potentially drawn-out process where Wickremesinghe, who is also the finance minister, will have to deal with demands from China, India and other creditors.

He still has to turn around the economy, which shrank 7.8% in 2022 and is expected to contract by 3% this year.

Implementing further reforms under the IMF programme, reducing record-high interest rates and controlling inflation will also continue to pose challenges for Wickremesinghe, who has faced trade union strikes after the tax and power hikes.

Critics say Wickremesinghe's economy-first approach ignores political and systemic reforms - like stronger anti-corruption measures and more transparency in government decision-making - as demanded by mass protesters who banded together as the "Aragalaya" movement last year.

"One year on, there is no real structural change in governance or system change," said Bhavani Fonseka, senior researcher at Colombo-based Centre for Policy Alternatives.

"The president does take this line that his priority is addressing the economy over everything else, but you can’t have that silo-ed approach and think people are going to be okay with it."

A crisis-weary public may still have to absorb years of continuing hardship as Sri Lanka tries to fix its economy during the four-year IMF programme, warned Jayadeva Uyangoda, a senior political analyst.

"Wickremesinghe has managed to neutralise the Aragalaya and that was a major success, but the economic and social crisis goes on," he said.

"Economic stability will take at least another couple of years." (Reuters)

Expected U.S. stopovers in coming weeks by Taiwan President Tsai Ing-wen are standard practice and China should not use them as a pretext for aggressive action toward the democratically governed island, a senior U.S. administration official said.

Tsai plans to transit through New York and Los Angeles as part of a trip to Central America, and sources have told Reuters that U.S. House Speaker Kevin McCarthy intends to meet her during the California leg of her visit.

China, which claims Taiwan as its territory, has said it is "seriously concerned" about Tsai's travel plans.

But the senior U.S. official told reporters on a call on Monday night that every president of Taiwan had transited through the U.S., and that Tsai has done so herself six times since taking office 2016, most recently in 2019.

She had met members of Congress during all of those visits, the official added, noting that the COVID-19 pandemic had limited her travel in more recent years.

"We see no reason for Beijing to turn this transit, again, which is consistent with long-standing U.S. policy, into anything but what it is. It should not be used as a pretext to step up any aggressive activity around the Taiwan Strait," the official said.

The official said Washington had communicated to Beijing that Tsai's stopovers are in keeping with past precedent.

"There is nothing new from our point of view," the official said.

Noting that President Joe Biden hoped to speak to Chinese leader Xi Jinping soon and that Secretary of State Antony Blinken would like to reschedule a postponed trip to Beijing, the official said: "We urge the PRC (People's Republic of China) to keep these channels of communication open."

"In terms of contact with McCarthy's office, we offer briefings to members before engagements. We tend to do that before travel, before meetings. We've had some regular contact there," the official added.

Tsai's anticipated U.S. meeting with McCarthy is seen as a potential alternative to a sensitive visit by the Republican Speaker to Taiwan, a trip he has said he hopes to make.

China staged military exercises around Taiwan in August following a visit to Taipei by then-U.S. House Speaker Nancy Pelosi.

Taiwan is China's most sensitive territorial issue and a major bone of contention with Washington, which maintains only unofficial ties with Taipei, but is required by U.S. law to provide the island with the means to defend itself.

China believes the United States is colluding with Taiwan to challenge Beijing and giving support to those who want the island to declare formal independence.

Taiwan's government says the People's Republic of China has never ruled the island and so has no right to claim it, and that only its 23 million people can decide their future. (Reuters)

South Korean President Yoon Suk Yeol said on Tuesday he would restore Japan's fast-track trade status after a summit with Japanese Prime Minister Fumio Kishida last week, a move he called crucial for bolstering supply chains in key areas.

Yoon announced the decision at a cabinet meeting, saying South Korea and Japan should make efforts to remove obstacles that hinder developing bilateral ties.

"I will preemptively order our trade minister today to begin necessary legal procedures to have Japan back on our white list," Yoon told the meeting, which was televised live. "I'm sure Japan will respond if South Korea first starts removing the obstacles."

South Korea and Japan removed each other from the list in 2019 amid a decades-old row over a 2018 South Korean court order for Japanese companies to compensate forced labourers during Japan's 1910-45 occupation of Korea.

Tokyo criticised the ruling, saying the issue was resolved under a 1965 treaty that normalised relations, and the strained ties fanned concerns over U.S.-led efforts to bolster cooperation to counter North Korea's nuclear and missile threats.

Yoon, who took office in May, has vowed to mend the bilateral ties and visited Tokyo last week for the first time in 12 years as a South Korean leader.

Yoon is pushing to resolve the forced labour feud through a plan unveiled this month under which a public foundation, funded by South Korean companies, would pay compensation.

The plan was welcomed in Tokyo but faced a backlash from some victims and South Korean opposition lawmakers, who accused Yoon of capitulating to Tokyo and inviting Japanese troops back to the Korean peninsula.

Yoon said that some people would seek political gain by fuelling "hostile nationalism and anti-Japan sentiment," without naming them, but that it was irresponsible to do so as the president.

He also accused his predecessor's government of leaving relations in a "quagmire" at the expense of crucial economic, security and people-to-people exchanges.

"I felt like I was trapped in a maze with no exit, but I couldn't just sit back and watch," Yoon said.

Kishida told him at the summit that he would uphold Japan's past apologies for wartime atrocities, including a 1998 declaration focusing on colonial rule, Yoon said, adding that now is the time for the two neighbours to go beyond the past.

"The relationship is not a zero-sum one where one side gains and the other side loses as much. It can and must be a win-win," he said.

Better ties would help build stable supply chains in high-tech industries such as semiconductors by linking South Korea's manufacturing technology with Japan's edge in materials, parts and equipment, he said.

The U.S. has called for greater trilateral cooperation with its key two Asian allies on economic security.

As a follow-up to the summit, Seoul's foreign ministry said on Tuesday it had normalised an intelligence-sharing pact, known as GSOMIA, with Tokyo to foster closer security cooperation on North Korea. (Reuters)