Thursday, June 1, 2023

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IMF calls for political stability in Sri Lanka to resume talks

The International Monetary Fund (IMF) is calling for political stability in Sri Lanka in order to resume key talks on bail out loan to rescue the island nation from the balance of payment crisis.

The IMF is still in contact with officials at technical levels within the Sri Lankan government and hopes to be able to resume discussions with higher-level officials, an IMF spokesman said on Thursday, after Sri Lanka’s president announced his resignation.

“We hope for a resolution of the current situation that would allow for our resumption of a dialogue on an IMF-supported program,” IMF spokesman Gerry Rice said in a scheduled press briefing.

Sri Lankan President Gotabaya Rajapaksa sent a resignation letter on Thursday after fleeing to Singapore. He had first fled to the Maldives on Wednesday to escape a popular uprising over his family’s role in a crippling economic crisis.

Rice said the IMF still has technical counterparties in Sri Lanka’s Central Bank and the Ministry of Finance and hopes to be able to have high-level discussions with the authorities to begin discussions on a program “as soon as possible.”

He said any new loan program for Sri Lanka would require adequate assurances on debt sustainability.

Clifford Lau, a money manager at William Blair, a holder of Sri Lankan bonds, said it was difficult to say when a deal could be reached with the IMF because the country needs to rebuild its government.

“I still believe that an IMF deal will eventually happen as there is the consensus amongst the political elites that it is the most credible way forward to restore confidence from within and outside,” Lau said. “What needs to stop now is the political infighting, and elect an all-parties leader to resume bailout talks as soon as possible.”

IMF Spokesperson Gerry Rice noted that the crisis in Sri Lanka has interrupted the ongoing talks with the IMF.

“So, like everyone else we are, of course, deeply concerned about the ongoing crisis, it’s impact on the Sri Lankan people, and particularly the poor and the vulnerable groups in Sri Lanka and closely monitoring the political and the social developments there,” Rice told reporters.

He said the IMF hopes for a resolution of the current situation that would allow for the resumption of a dialogue on an IMF supported program.

“He added that that in June, less than a month ago, things are moving so fast, but less than a month ago there was an IMF staff team in Colombo.

And we did have discussions, actually, constructive discussions with the authorities on a set of economic policies and reforms that could be supported by, potentially by an IMF program. We don’t have a program with Sri Lanka right now. But we were discussing what could be a program,” he said.

Rice also said that Sri Lanka’s public debt is assessed as unsustainable and as is the case with every IMF program, not just the case of Sri Lanka, a program would require adequate assurances on debt sustainability.

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