IMF Extended Fund Facility for Sri Lanka remains unchanged

IMF Extended Fund Facility for Sri Lanka remains unchanged

15 April 2019 07:30 pm

The International Monetary Fund (IMF) has given an assurance to Sri Lanka that the Extended Fund Facility arrangement of around US$1.5 billion or SDR 1071 million will remain unchanged, as approved last June 2016, IMF official sources said.

 

The lending agency has arrived at this decision despite the setback in government’s commitment towards economic reforms during the 52 day political instability in the country.

The government authorities have requested to extend the EFF arrangement for an additional year, until early June 2020, to allow more time for the completion of the economic reform agenda, IMF Sri Lanka mission chief Manuela Goretti said..

The IMF team reached understandings at the staff level with the Sri Lankan authorities last February on the request, which will be considered by the IMF Executive Board in May, together with the request to complete the fifth EFF review, she said.

Following the IMF team visit to Colombo last February, the authorities have been taking steps to complete all the pending actions for the fifth review, including submission to Parliament of the 2019 budget.

As planned, the Board is expected to consider Sri Lanka’s request for completion of the fifth review in May 2019, after the IMF-WB Spring Meetings. she revealed..

A total of about US$ 500 million (SDR 356 million) remains to be disbursed under the EFF arrangement, she disclosed.

Subject to the IMF Board’s approval of the extension request, this is expected to be spread evenly into three tranches, over three reviews.

Accordingly, the amount of the next tranche for the completion of the fifth review is expected to be about US$165 million (SDR 119 million).

The tranches for the sixth and seventh EFF reviews will be comparable in size and are expected to be disbursed in late 2019 and early 2020, subject to the completion of the respective reviews, she confirmed.

The US dollar amount of each tranche will be determined based on the value of the IMF’s SDR (Special Drawing Rights) at the time of IMF Board approval of the disbursement, she added.

The The International Monetary (IMF) has cautioned Sri Lanka saying the country must ensure policy reforms continue ahead of upcoming elections in the country.

Anne-Marie Gulde, Deputy Director of the Asia and Pacific Department at the International Monetary Fund said that Sri Lanka must pursue a prudent policy mix in the run up to the elections.

She added that the authorities should continue to pursue prudent policy mix in the run-up with sustained revenue-based fiscal consolidation and adequate vigilant monetary policy and continuing efforts to build reserves

She also noted that it is critical that market confidence is being maintained, and the economy’s resilience to shocks, which has been strengthened over the past couple of months continues to be strengthened.

“There is high public debt, so market confidence is a critical element. Structural reforms are ongoing. They need to focus on trade opening, SOE reforms, and increasing competitiveness,” she said.

Anne-Marie Gulde also said that unemployment in Sri Lanka is low, but in the forward-looking policies of competitiveness and looking at an ageing population, labor reforms in Sri Lanka are essential.One of them, she says, is to increasing the participation rate of women also, which is very low in Sri Lanka.