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Sri Lanka begins preliminary talks with IMF on a funding facility

Sri Lanka and the International Monetary Fund held preliminary talks via zoom today Monday 11 on a funding program as a prelude to upcoming technical level negotiations relating to fund facility during Spring Meetings commencing on April 18 in Washington.

Central Bank Governor Dr. Nandalal Weerasinghe and Treasury Secretray Mahinda Siriwardena participated in the soom meeting that lasted around 40 minutes today with Anne-Marie Gulde -Wolf, Deputy Director, Asia and Pacific Department at International Monetary Fund

Sri Lnka team comprising the Finance Minister the Central Bank Governor and the Treasury will leave the country for Washington next week for IMF’s Spring Meetings on April 18 to start technical level negotiations for program support and debt restructuring.

e Central Bank and the Finance Ministry have already called for Requests for Proposals from prospective legal and financial advisers to select suitable experts for the debt restructuring process.

They will have to provide financial and legal advisory and technical assistance during negotiations with the IMF and other creditors for debt restructuring.

The Central Bank expects to pursue both debt restructuring and programme support from the IMF together as the clock is fast ticking ahead of the next large sovereign debt repayment of a billion dollars in July this year.

The ability of the country to settle the bond and other foreign debt obligations would solely depend on the level of success the authorities achieve during these talks with the IMF and other creditors.

Upon coming into a preliminary understanding about programme support during technical evaluation with the IMF, Sri Lanka will issue what is called a ‘Letter of Intent’ to the IMF stipulating the macroeconomic adjustments the domestic authorities are willing to undertake in order to put the economy back into working condition.

Dr. Weerasinghe responding to a question as to the size of programme support expected from the IMF said that they might seek full access to funds under Sri Lanka’s quota under an Extended Fund Facility (EFF).

FF is a long-term engagement with the IMF running into three years with structural adjustments into the member economy.

Under the current quota, Sri Lanka may be able to seek up to US$ 3.0 billion from the IMF, but the funds will not come at once as they are released in several tranches looking at the progress the recipient country makes with the agreed structural reforms to the economy.

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