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IMF approves loan to Lanka

29 June 2010 12:50 am - 27     - {{hitsCtrl.values.hits}}

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The International Monetary Fund (IMF) says it has approved the disbursement of the delayed third tranche of a $2.6 billion loan to Sri Lanka.

"The Executive Board of the International Monetary Fund (IMF) today completed the second and third reviews of Sri Lanka's economic performance," the IMF said in a statement.

The global lender said the completion of the reviews allowed for the immediate disbursement of an amount equivalent to SDR 275.6 million (about US $407.8 million). (Reuters)


IMF Press release:

The Executive Board of the International Monetary Fund (IMF) today completed the second and third reviews of Sri Lanka's economic performance under a program supported by a Stand-By Arrangement (SBA). The completion of the reviews enables the immediate disbursement of an amount equivalent to SDR 275.6 million (about US$407.8 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 689.0 million (about US$1,019.4 million).

The Executive Board also approved a request by the Sri Lankan authorities for a one-year extension of the SBA and accordingly a rephasing of the future disbursements into seven equal amounts of SDR 137.8 million (about US$203.9 million) in light of the recent delay in the program.

The SBA was approved on July 24, 2009 (see Press Release No. 09/266) for an amount equivalent to SDR 1,653.6 million (about US$ 2,446.7 million) or 400 percent of Sri Lanka's quota.

Following the Executive Board's discussion on Sri Lanka, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“Overall economic conditions in Sri Lanka are improving and the economy is likely to show strong growth this year. Inflation remains subdued and average inflation for the year as a whole is expected to remain in the single digits. External balances are strong, remittance inflows continue at a high rate, tourism prospects are strengthening rapidly, and gross reserves are at comfortable levels.

“Monetary conditions are stable. Interest rates have declined and credit growth has shown signs of recovering. The central bank’s policy stance remains appropriate, although there may be need to tighten it if credit and inflationary pressures pick up sharply. The central bank has intervened in the foreign exchange market to rebuild reserves, and has allowed the exchange rate to trade within a recently widened, although still narrow band.

“Financial sector reform is in line with the program and has substantially addressed the regulatory weaknesses. The authorities’ reform agenda has been broadened to include the introduction of a deposit insurance scheme, regulation of pension funds, and steps to deepen capital markets.

“Despite the weaker-than-programmed 2009 fiscal performance, the government’s 2010 budget proposal, if carried out, would significantly address past fiscal slippages, mainly through comprehensive tax reforms and sizeable cuts in recurrent spending. At the same time, the budget would allow for much needed reconstruction-related infrastructure investment, while protecting the society’s most vulnerable and addressing the humanitarian needs of those adversely affected by the conflict.

“The authorities’ efforts to reform trade and excise taxes and the Board of Investment’s tax concession regime are a signal that they recognize the importance of a broader tax base and higher revenue in achieving the program’s original goals of fundamental and sustainable reduction of the deficit and the public debt. These efforts should be followed by important steps to permanently reform tax concessions and broaden the VAT and income tax bases to be introduced as part of the 2011 budget.

“To promote private investment and growth, the authorities plan to formulate a national investment strategy, which will include reforms aimed at reducing the currently high cost of doing business in Sri Lanka,” Mr. Shinohara stated.

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  Comments - 27

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  • Concerned citizen Tuesday, 29 June 2010 06:58 AM

    IMF is good when they give us money! Don't forget all these come with conditions attached. Just like the GSP+ given to us by the EU. When we act in violation of those conditions, there is no point in telling IMF or EU to go fly a kite!

    Dr P Iddamalgoda Tuesday, 29 June 2010 06:59 AM

    WE Sri Lankan citizens made great sacrfices in life and limb and also suffered costs of war. Can the govt or Mr Cabraal of the Central bank say what assets of gold, money, military, property and equipment that we have recovered from the LTTE. Why do we ned IMF when that money should be emough. Has not KP come out with it. It should be for the citizens of this country. PI

    rihad Tuesday, 29 June 2010 07:05 AM

    if this was Ranil's government, it would be worse than this.

    I Hussein Tuesday, 29 June 2010 07:19 AM

    Ranil is like oxygen for you guys. You all will suffocate if you dont mention Ranil's name.

    Jason Tuesday, 29 June 2010 07:19 AM

    IMF delayed it until there is an emminenet other financing source. President is visiting Ukraine and trade pacts are likely. IMF is a lending institution. Lending is their business. But there are other lenders too! It's a matter of winning or losing business even for the mighty IMF.

    sampath Tuesday, 29 June 2010 07:29 AM

    Our Govenor General always says that we have improved with the revenue. Then why do we need modeny from IMF?
    For their luxary life????

    Hema Tuesday, 29 June 2010 07:36 AM

    Well said Mohan.

    Gune Tuesday, 29 June 2010 08:12 AM

    IMF money is not for fiscal spending, Sampath

    nizam Tuesday, 29 June 2010 02:28 AM

    Are we going to tell the IMF that we don't need any money from them? Where is our cardboard leaders and shirm wisdom readers?

    MaPer Tuesday, 29 June 2010 03:47 AM

    This is why the Budget is being presented today 29th.

    MaPer Tuesday, 29 June 2010 03:52 AM

    I though we said we need only our close neighbours as friends.

    Gayan Samarasekara Tuesday, 29 June 2010 03:56 AM

    I thought IMF, World Bank stuff have already been "unplugged", as Wimal is there.

    Ind Tuesday, 29 June 2010 04:14 AM

    Unlike EU, I think IMF have more educated, broad minded and professional people. Therefore they didn't adhere Tamil Diaspora and LTTE sympathisers demands and lies.

    Lional De Alwis Tuesday, 29 June 2010 04:15 AM

    At least now can we expect the cost of living to be reduced in the form of reduced prices of essential items..

    Concerned Tuesday, 29 June 2010 10:04 AM

    More Money, More Thamashas! We are glad.

    Wasantha Tuesday, 29 June 2010 04:16 AM

    Yes. We agreed and implemented all the conditions set out by the IMF. How can they refuse?

    Murshid Idroos Tuesday, 29 June 2010 04:19 AM

    Disaster on the long run. Loans servicing would burden our treasury, the money which could otherwise be spent for other development work .

    As spoken by Dr Mahathir as to the reasons for malaysias sucess various loans were granted even in severe harsh times but malaysia turned down .

    We should learn to grow with our own means outside loans

    Murshid Idroos Tuesday, 29 June 2010 04:27 AM

    Anyway thank you very much for your non political support

    MOHAN D MENDIS Tuesday, 29 June 2010 04:34 AM

    As usual colombians are jealous when the country is progressing. Their dollars come in bags as long as Govt is made to dance to their tunes. what a pathetic lot these are

    malkanthi Tuesday, 29 June 2010 04:50 AM

    Once people clearly understand about the Revenue, Interest and Capital Payments against the loans taken in the budget, only they will know where the country is heading!! Without doubt, revenue is nill compared to them!

    firoz Tuesday, 29 June 2010 04:52 AM

    Shouldnt the country try and progress by its own resources and within its own affordable scope ! Slow and steady ! These massive loans will have to be repaid only by our future generations , if not spent wisely on ventures that will generate return (which i dont see happening by this government) ! Many of of our future generatiosn will be locked in debt to a lot of foreign lenders !

    citizen1 Tuesday, 29 June 2010 05:02 AM

    Wishful thinking! Prices will only go down if elections are round the corner.

    farshard Tuesday, 29 June 2010 05:46 AM

    WOW then we can arrange for another IIFA in sri lanka

    POL MAMA Tuesday, 29 June 2010 10:57 AM

    loans -loans-loans- for whom to benefit??one hand cost of lving is sky rocketing-other hand our childrens children born with debts

    MAHINDA PERIS Tuesday, 29 June 2010 06:04 AM

    most of this loan goes as kick backs .The funniest thing is like dominos the day SL Govt cannot afford to repay this

    who is going to foot the bill ????

    up to today total interest liability alone comes to 40% of of our revenues.

    Gyan Tuesday, 29 June 2010 06:34 AM

    I wonder what will be the inflation rate of this country after this loan

    Murshid Idroos Tuesday, 29 June 2010 06:44 AM

    Anyway loans are a impediment for our progress


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