Friday, June 14, 2024

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Minister Bandula contradicts Treasury Sec Mahinda’s claim on using IMF EFF

By: Staff Writer

Colombo (LNW): Minister of Transport, Highways and Mass Media Bandula Gunawardene says that part of the funds received from the International Monetary Fund (IMF) has to be used for the payment of government employees’ salaries, pensions and allowances in the months of March and April.

This was a complete contradiction of Treasury Secretary Mahinda Siriwardenas statement claiming that the Government can use the entirety of US$ 2.9 billion four year Extended Fund Facility (EFF) from the International Monetary Fund (IMF) for budgetary support.

Minister Bandula Gunawardene mentioned that the government’s income is not sufficient to complete those payments.

He said “The biggest crisis of state finance is that we don’t have enough income to cover our day-to-day running costs.”

“For example, for the month of March, government employees’ salaries, pensions, allowances and other day-to-day maintenance expenses have been estimated at Rs. 196 billion. The expected total revenue is only Rs. 173 billion. Then it lacks Rs. 23 billion to sustain for March”, he added.

Meanwhile, more than Rs. 500 billion worth of multi-party debt needs to be paid, the minister emphasized, adding that they will be short of around Rs. 500 billion to pay salaries for the months of March and April.

“The treasury has mentioned that it will use a part of the first tranche received from the IMF to pay these two salaries”, the Minister claimed.

However the Treasury Secretary Mahinda Siriwardena.disclosed that the Government can use the entirety of $ 2.9 billion four year Extended Fund Facility (EFF) from the International Monetary Fund (IMF) for budgetary support.

Siriwardena said that there is no cap within $ 2.9 billion for such support. Unlike in the past 16 programs with the IMF when funding had been to bolster foreign reserves, it was the first time that the use of money was opened up for budgetary support.

Siriwardena explained that Sri Lanka will be using EFF disbursements via the Central Bank to meet Government expenses such as payment of salaries and pension as well as external debt servicing.

The IMF EFF program envisages Sri Lanka receiving $ 660 million per annum between 2023 and 2026 and $ 329 million in 2027 subject to half yearly review.

Finance Minister Ranjith Siyambalapitiya yesterday revealed that of the $ 333 million received as the first tranche of EFF, $ 121 million was used to settle a loan instalment of the Indian Credit Line.

IMF Staff Report said all purchases (by Sri Lanka) under the EFF arrangement are proposed to take the form of budget support and this is to ease domestic financing needs of the Government. 

As per the program the CBSL is expected to make outright FX purchases on a net basis of $1.4 billion in 2023.

IMF said external financing needs in 2022 were covered by savings from the debt moratorium ($ 2.8 billion), emergency support from the International Financing Institutions (IFIs) from repurposing of existing project loans and support from key bilateral partners, such as India (food and fuel credit lines, currency swap, and ACU balances accumulation).

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