Friday, 15 January 2021 19:46

IMF puts forward options for Sri Lanka to continue fund facility

The International Monetary Fund (IMF) has offered the option for Sri Lanka to take it or leave the last tranche of Extended Fund Facility (EFF) that would also unlock substantial multilateral and bilateral financing (possibly debt relief as well),

The preconditions for financial support are the same as for any other member, Masahiro Nozaki, IMF mission chief for Sri Lanka said.

The continuation of the EFF policy reform programme will increase the prospects of improving the sovereign rating, a senior economist who has in-depth knowledge in dealing with the IMF in the past .He added that in this case, a successful restructuring would be difficult and costly.

He pointed out that government will be compelled to engage with the IMF to execute the restructuring.If no new IMF and private sector credit comes in, gross reserves would fall to about US $3.7 billion by end of 2021, he predicted.

The $1.5 billion EFF arrangement approved in 2016 expired on June 2, 2020. Given that the final review under the arrangement was not completed, Sri Lanka could not avail of the last disbursement under the EFF, amounting to SDR118.550 million equivalent to around $.200 million.

Disbursements under any Fund arrangement can only be made during the period between the date of its approval by the IMF Board and its expiration date, IMF mission chief Masahiro Nozaki said.

Therefore at this point, for Sri Lanka to access any additional Fund resources, the IMF Board approval of a new arrangement would be needed, he disclosed.

In April 2020, IMF received a request from the Sri Lankan authorities for emergency financial support under the Rapid Financing Instrument (RFI),

Assessing relevant conditions for the RFI has taken longer than for other countries, due to Sri Lanka’s daunting economic challenges, high public debt, and Parliamentary elections in August. The RFI request remains in place, Mr. Nozaki pointed out.


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