Public sector workers demand the government roll back high taxes imposed as a precondition to unlock $2.9bn IMF loan.

Schools on Wednesday cancelled term tests and outpatient departments at hospitals closed due to the public sector work stoppage that involved more than 40 trade unions. Fewer vehicles were seen on roads.

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

“All considered, our work-to-rule was for two hours, but we will consider a full-blown strike if the government does not roll back the new tax rates,” Rajitha Seneviratne, secretary of the air traffic controllers’ association, told AFP.

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

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

State-run buses were also operating, the president’s office said, but only a few of them were seen on the roads while attendance in schools, offices and factories had dropped sharply.

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

Trade union spokesman Haritha Aluthge said talks with the authorities overnight ended inconclusively, forcing them to go ahead with Wednesday’s work stoppage.

Professionals have also joined the trade unions in protesting against the sharp increase in income taxes since January.

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

Unions say the strike duration will depend on the government’s response to their demand to reverse the new taxes, which were among the measures taken to qualify for a $2.9bn rescue package from the IMF. Protesters are also demanding the government lower record high interest rates and reduce power tariffs.

Bailout expected next week

The Washington-based lender’s executive board is due to decide on Sri Lanka on March 20 and is widely expected to release the first instalment of the nine-tranche loan spread over four years.

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

“Sri Lanka is at a very sensitive point and it is important for the public to understand that and extend support,” cabinet spokesman and Transport Minister Bandula Gunawardane told a weekly briefing on Tuesday.

“If public revenue improves then the public sector will be the first beneficiaries of any relief that can be given.”

Sri Lanka formally sought IMF help on March 18 last year after defaulting on its $46bn foreign government debt in mid-April.

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

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

“We reiterate our commitment to a comparable treatment of all our external creditors, with a view to ensuring all-round equitable burden sharing for all restructured debts,” he said.

Sri Lanka’s unprecedented economic crisis since late 2021 has caused severe shortages of food, fuel and medicines. It led to months of protests that led to the removal of President Gotabaya Rajapaksa in July last year.