Sri Lanka's new leftist leader faces IMF deal challenges amid economic crisis, analyst says: Video

The IMF rescue package, which provided a crucial lifeline to the bankrupt island nation, came with stringent austerity measures that have sparked widespread discontent.

Dissanayake, 55, who won the presidential election in a landslide victory, campaigned on promises to reverse unpopular tax hikes, raise public sector wages, and seek a better deal with the IMF. 

However, experts warn that the new leader has little room to manoeuvre. "There are certain red lines that the IMF will not agree to negotiate," says Murtaza Jafferjee, chairman of Colombo-based economic think tank Advocata.

Among these non-negotiable terms are key fiscal targets and the independence of the central bank. "One is on the fiscal side, the primary balance target which is 2.3 percent going into next year. And the second one is that there cannot be any change to the central bank law, which makes the bank independent where its primary mandate is price stability. And the second is that there is no monetary financing," Jafferjee explained.

Sri Lanka’s economic troubles began as a result of an unprecedented financial meltdown two years ago, leaving the country with unsustainable debt and a severe balance of payments crisis.