State Minister of Money, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal yesterday said he found the International Monetary Fund’s (IMF) reaction to Sri Lanka getting a $ 1.5 billion swap from China “surprising”, and reiterated the Government could maintain a sound macroeconomic framework without support from the multilateral lender.
State Minister Cabraal took to twitter to respond to comments made by IMF Communications Department Director Gerry Rice during a press briefing on Thursday where he said the IMF would continue to “closely monitor” developments in Sri Lanka.
During the briefing in Washington Rice also acknowledged Sri Lanka had sought IMF assistance to limit pandemic impact but both sides had been unable to reach a consensus given the country’s “daunting economic challenges and high public debt”.
Cabraal tweeted: “The IMF’s response to the news that Sri Lanka has been able to secure a SWAP facility of CNY 10 billion ($ 1.5 billion) from the People’s Bank of China is quite surprising. The request for COVID assistance was made by the Government from the IMF early last year at the time the COVID Pandemic started. But the IMF was dragging its feet in providing that facility.”
He went onto say that IMF assistance proved to be unnecessary as the Government managed to weather the challenges.
“Nevertheless, the Government managed to effectively provide the necessary relief and support to the Sri Lankan people as well as maintain a framework of sound macro fundamentals even WITHOUT such financial support from the IMF.”
The IMF spokesman’s comments also elicited a response from Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva who has been calling for the Government to seek IMF support for months and pushing for more transparency on its debt repayment strategy.
“So the truth is @IMFNews has not approved @an_cabraal et al #SriLanka application for support due to unacceptability of ‘alternative economic model’ (no plan for debt sustainability) as revealed by them today.
But all this time it was ‘We don’t need the IMF’. What hogwash!” Dr. de Silva said.
Sri Lanka’s last IMF program was started in 2016 under a $ 1.5 billion Extended Fund Facility (EFF) program, which expired in June 2020, after being extended by one year following the constitutional crisis in 2018.
“We did receive a request from the Sri Lankan authorities for emergency financial support to help fight the COVID pandemic,” the IMF Spokesman said. Rice said they have sought, but not reached understanding, on how to fulfil the key requirements for what could be a rapid financing instrument which would include policies to continue ensuring debt sustainability to address the balance of payment challenges including from the COVID‑19 impact on tourism and to preserve international reserves.
“Indeed, Sri Lanka has relied on important restrictions since last year and recently introduced additional measures such as a requirement to convert 25% of export proceeds. We continue to closely monitor these economic policy and financial developments in Sri Lanka including the recent agreement on a swap line with the People’s Bank of China,” Rice said.
(FT)