Sri Lanka seeks IMF funding for $ 800 mln
Sri Lanka’s ailing economy is set to receive a fiscal-boosting injection as the International Monetary Fund (IMF) will resume lending after the new government presents its maiden budget in November this year.
The country has still not received external financing from the IMF in 2020, either as part of emergency support during the coronavirus pandemic or as part of a regular Extended Fund Facility (EFF) programme.
More clarity on the government’s medium-term economic policies could facilitate such financing, but agreeing on policies to place public finances on a consolidation path will be challenging, economic analysts said.
Sri Lanka’s recent three-year Extended Fund Facility with the IMF expired in early June since the country had deviated from EFF programme’s revenue-based consolidation strategy.
The disbursement of the final tranche in June 2020 of IMF’s US$ 1.5 billion bailout to help avert a balance of payments crisis will be delayed by at least three or four months due to the COVID-19 pandemic and its impact on policy making, official sources said.
Discussions are continued with the IMF to raise another $ 800 million under its Rapid Financing Facility and obtain the balance $200 million following the seventh review of its EFF to Sri Lanka after the presentation of the formal budget in Parliament.
However the IMF has assured that they will provide a realistic option for the country’s economic recovery, a senior official closely connected to the IMF programme told the Business Times.
The seventh and final review under the EFF arrangement was scheduled to take place after mid-April.
“It remains to be seen whether conditions will be placed with sufficient time left for a review to be concluded before the end of this year,” he added.
The IMF is also evaluating Sri Lanka’s request for rapid financing facility in support of the country hit by the coronavirus.
The Sri Lankan authorities also expressed interest in a range of options for future engagement with the Fund, he added.
The authorities should move ahead with growth-enhancing structural reforms to fully harness Sri Lanka’s economic potential and foster greater social inclusion, IMF sources said.
Plans will have to be devised to enhance the efficiency of state-owned enterprises, enabling them to operate on a sound commercial basis.
These plans need to be supported by a visible commitment to strengthen governance and transparency, notably in the energy sector, and renewed efforts to tackle corruption, sources added.