CB Chief says no dire need for emergency funding

1 January 2016 03:03 am - 0 - {{hitsCtrl.values.hits}}

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But says government may decide to make “some sort of” fund arrangement with IMF

Says foreign reserves at comfortable levels
Debt repayments at US $ 4.3bn next year
Looking for IMF and WB funding for swap rollover
Economy grows 5.2% in first 9 months
Fiscal deficit at 5.1%, up from 4.8%

The country has no need to raise emergency funds, though the government may decide to make a formal request to the International Monetary Fund (IMF) for “some sort of arrangement” between Sri Lanka and the multilateral lender, Central Bank Governor Arjuna Mahendran said.

“The government at the moment is in informal consultation (with IMF). As part of that consultation, the government may decide to make a formal request for some sort of arrangement between the IMF and Sri Lanka. But it is at a very early stage, nothing has been decided so far,” Mahendran said.

Sri Lanka is still a beneficiary of an IMF stand-by-facility obtained in 2009, and as a result, IMF sends teams twice a year. A team from IMF is due in February this year.

According to Governor Mahendran, the country’s foreign reserves are at comfortable levels—4.5 months worth of imports—though he admitted that some of that were borrowed.

“But the country is in no dire need of any emergency funding of any sort and therefore may be there’s no need to speculate that the IMF is coming for the rescue of Sri Lanka.”

Deputy Governor Nandalal Weerasinghe said Sri Lanka total debt payments inclusive of interest and IMF payments in the next 12 months stand around US $ 2.3 billion.

He also said that there is US $ 2 billion worth of long term swap obligation which would be rolled over at current market rates as per the agreements.
“Swaps are rolled over every year at current market rates, those moneys are not going out,” he noted.

Governor Mahendran said one of the reasons Sri Lanka is talking to the IMF and the World Bank was to refinance these swaps, obtained through state banks such as the Bank of Ceylon, at concessional rates.

“There is absolutely no cause for alarm,” he asserted.

Sri Lanka’s economy grew 5.2 percent in the first 9 months of 2015 against 2.4 percent in the corresponding period of the previous year.
The fiscal deficit in the first 9 months is estimated at 5.1 percent up from 4.8 percent in the same period of the previous year. Sri Lanka targets a 5.9 percent budget deficit for 2015.

Seeks clarity on taxing cash withdrawals
The Central Bank Governor Arjana Mahendra yesterday said he was seeking clarity from the Finance Minister with regards to the Budget proposal to tax cash withdrawals from commercial banks.
The Budget 2016 proposed to charge 2 percent withdrawal charge for cash withdrawals between Rs.1 million and Rs.10 million and 3 percent for anything above.
That is, a person withdrawing Rs.1 million has no choice but to pay Rs.20, 000 to the government.
“We are seeking clarity on this proposal. We have not issued any directives to the commercial banks on this matter so far,” Mahendran said.

The Budget also proposed to bar commercial banks from leasing activities and provide 100 percent government guarantee for deposits in finance companies.
However Governor Mahendran said following the discussions with the Finance Minister, the guarantee would only be provided on senior citizen deposits.

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CB Chief says no dire need for emergency funding

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