Sri Lanka is on the verge of uncertainty in continuing IMF programme that would also unlock substantial multilateral and bilateral financing (possibly debt relief as well), increase the prospects of improving the sovereign rating.
Central Bank Governor has told local media that “We do not want to go for the conditionality of the IMF. We were told this arrangement is without any conditions. If that is the case, when the opportunity comes we will renegotiate it. It has to be negotiated on our conditions.
Sri Lanka s stand on seeking Rapid Financing Instrument (RFI) facility and the ongoing Extended Fund Facility (EFF) of the International Monetary Fund (IMF) expressed by its Governor Prof. W.D. Lakshman with no conditionality has pushed the country into a precarious position in its quest for international funding.
In the wake of Sri Lanka’s stance on IMF EFF the country’s ailing economy amidst COVID-19 could further worsen as the International Monetary Fund (IMF) has put on hold the final disbursement of the US$1.5 billion Extended Fund Facility.
“The country could not avail of the last disbursement under the EFF, amounting to SDR118.550 million (around Rs.200 million) due to incompletion of the final review of EFF arrangement which has expired in June 2020”, Masahiro Nozaki, IMF Mission Chief for Sri Lanka told local media.
He pointed out that, “disbursements under any Fund arrangement can only be made during the period between the date of its approval (in this case June 2016) by the IMF Board and its expiration date”.
For extended arrangements under the EFF, this period cannot be longer than four years, he added.
The EFF with the IMF was extended up to early June this year following the Easter Sunday terror attack last year and thereafter the new government has deviated from the EFF programme’s revenue-based consolidation strategy.
However Mr. Nozaki noted that they continue to engage with the Sri Lankan authorities and are considering the full set of options for engagement.
On financial support the IMF is assessing all relevant conditions on Sri Lanka’s request for a Rapid Financing Facility (RFI) worth $800 million, taking account of the new government’s policies and efforts to address the daunting economic challenges posed by COVID-19, he added.
(LIN)