Financial Times

IMF says political crisis delays aid
By Duruthu Edirimuni
The International Monetary Fund's approval of more aid is likely to be delayed by three months until there is enough progress in the government's economic reforms agenda, IMF Senior Resident Representative, Jeremy Carter, told The Sunday Times FT. The IMF is reviewing Sri Lanka's economic situation before disbursing the second $80 million tranche under the $567 million concessionary lending scheme, Poverty Reduction and Growth Facility (PRGF).

The head of the IMF review mission, Jehangir Aziz, Deputy Division Chief of the IMF Asia Pacific, was in the country two weeks ago to review Sri Lanka's economic situation. The second tranche was due in December but a delayed budget, together with the political impasse in the country, made the IMF shelve the decision. Carter said that the uncertain nature of the political situation is a deterrent to the IMF's review process. He said that the political uncertainty is to some extent affecting the country's economic operations.

Since the economic timetable is tied to the political roster, such as provincial elections taking place within the next three months, the review will advance only when sufficient progress is carried out on the economic reform agenda, Carter said. He said that aid disbursement in 2003 were a success as it was disbursed faster than previous years.

Carter said that there was a very clear policy from the UNF government to give money for foreign finance projects. However, he said that the government has existing commitments and need to get certain processes such as legislative enactments in order.

The IMF offers concessional financing under the PRGF to eligible low-income members and the loans carry an interest rate of 0.5 percent. It approved a PRGF to Sri Lanka in April 2003 and released its first tranche during the same month with a view to releasing the rest in three tranches of US$ 81 million over three years.

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