The Ministry of Finance says international financial institutions (IFIs), including the IMF, the ADB and the World Bank, have emphasized the importance of maintaining social stability and protecting democratic institutions in the country for them to assist Sri Lanka to effectively manage the economic issues confronted by the country and the people.
The Finance Ministry stated this in a statement issued on the meetings of the Sri Lankan delegation, led by Minister of Finance Ali Sabry, with the International Monetary Fund (IMF) and the World Bank Group held in Washington DC from 18 to 22 April 2022.
The delegation had meetings with several international financial institutions, including the IMF and the World Bank, and bilateral partners during their stay in Washington DC.
The discussions were mainly focused on the present critical situation of the Sri Lankan economy, and policies and measures to be implemented in the immediate, short, and medium- term.
The key areas discussed included (a) addressing the immediate need of restoring supply chains of essential items, including fuel, LP gas, and pharmaceuticals, (b) securing bridge financing in the interim period until IMF financing with an economic programme is finalized, and (c) implementing short to medium term policies to ensure macroeconomic stability and facilitate greener, more inclusive, sustainable, and stable growth in the country.
Views were exchanged on ways and means of supporting the people in the immediate term and the future direction of engagement with Sri Lanka on a more coherent manner.
The overwhelming support, cooperation and solidarity extended to the people of Sri Lanka by all key IFIs, other institutions/agencies and friendly nations were extremely encouraging during this critical juncture of the Sri Lankan economy.
The delegation met with the IMF’s Managing Director, First Deputy Managing Director and Deputy Managing Director overseeing Sri Lankan affairs, as well as other senior officials at the technical level.
The meetings with the IMF were mainly focused on securing an Extended Fund Facility (EFF) to overcome the current difficult situation in the Sri Lankan economy with a medium-term view, following the formal request made by Sri Lanka in mid-March 2022.
A formal request was also made for a Rapid Financing Instrument (RFI) for consideration of the IMF to obtain immediate financing into the country, which will be a bridge to the EFF. Entering into a staff level agreement on an IMF programme as early as possible is important since it will help unlock bridge financing facilities from other IFIs and bilateral partners.
Among specific topics discussed with the IMF were the debt restructuring process, revenue and expenditure measures of the government, public financial management, reforms of state-owned enterprises and energy pricing, strengthening social safety nets, monetary policy and Central Bank independence, foreign exchange management, financial sector stability and connected policies, and growth enhancing structural reforms.
An IMF mission is expected to conduct in-person and/or virtual technical meetings with Sri Lankan authorities in early May 2022 towards reaching an agreement within a short period on a programme for Sri Lanka in parallel to the debt restructuring process.
The meetings with the World Bank were focused on obtaining immediate foreign financing and providing support to the Government to identify most appropriate policies to be implemented under an IMF supported programme.
The importance of stronger social safety nets to mitigate the adverse impact of the current economic crisis on the poor and vulnerable segments was also discussed in detail.
