The Central Bank (CB) is continuing negotiations with the International Monetary Fund (IMF) team which arrived this week amidst previous statements by the CB that negotiations for the US$1.9 billion loan had been finalized.
CB’s Director of Economics Research P.N. Weerasinghe told the Sunday Times FT on Friday that the IMF team was in Colombo for negotiations with the CB. “Basically, they are updating the latest information from when they were previously here about three months ago,” he said.
“The situation has now changed. They are finalizing the documents.” Dr. Weerasinghe said he could not comment on when the application for the loan will go the IMF Executive Board for approval.
The loan was sought by the government in March 2009 to shore up its foreign reserves and was expected to be approved in April or May of 2009. However, persistent delays have left the outcome of the loan hanging in the balance. On Wednesday, the US government said it was not blocking the proposed loan and has never done so, noting that the IMF Board was awaiting the Letter of Intent (LoI) to the IMF from the Sri Lankan government. This message was conveyed to Foreign Secretary Dr. Palitha Kohona during a meeting with Charge d’Affaires of the US Embassy James Moore, according to a Foreign Ministry statement.
The need for an LoI was exclusively reported in the Sunday Times on June 21. “The US government has on no occasion, either publicly or privately, threatened to block the IMF loan to Sri Lanka on political ground,” Mr. Moore was quoted as saying. The statement said Mr. Moore explained that the decision will be taken by the Executive Board of the IMF, of which the US is a member, based only on economic criteria and not political factors.
The statement also mentioned that Mr. Moore added the US government and other members of the Board will review and consider the loan on financial and economic criteria after such time when the government of Sri Lanka submits the Letter of Intent to the IMF.
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