The International Monetary Fund (IMF) said it is ready to discuss any Sri Lankan request for a follow up programme to its current US$2.6 billion loan programme, which is now on hold due to the island nation’s failure to implement currency flexibility.
The IMF has withheld the eighth tranche of the loan since September after the central bank failed to meet the global lender’s repeated request to allow rupee flexibility.
However, the central bank said Sri Lanka would seek a follow up or surveillance programme for its US$59 billion economy after the current loan facility, which is scheduled to be completed by the end of 2012.
“We are always available and willing to discuss the issue with the government,” Sri Lanka’s IMF country representative Koshy Mathai told Reuters, referring to the follow up programme.
Central Bank Governor Ajith Nivard Cabraal on Tuesday told Reuters the follow up programme will help IMF to monitor the economic performance of Sri Lanka, which will start repaying the Fund’s loan from 2014 onwards.
Mathai declined to comment when asked if Sri Lanka has done enough to receive the eighth tranche after a three per cent devaluation in November, saying: “A mission is coming to discuss issues this month.”
In July, Central Bank Governor Ajith Nivard Cabraal said Sri Lanka was capable of managing on its own when asked if Sri Lanka would go for another IMF programme to maintain investor confidence.
However, it was not clear whether the central bank could negotiate the follow up programme without completing the current deal while currency flexibility still remains an issue.
The central bank still defends the rupee at 113.90 per dollar and has spent more than US$780 million to keep the exchange rate steady since a three per cent devaluation on November 21. It spent a net US$1.36 billion in the first nine months of 2011 to keep depreciation pressure at bay.
The IMF, which has already disbursed US$1.8 billion of the US$2.6 billion, said during its last mission in September that Sri Lanka’s non-borrowed reserves have steadily declined and it should limit intervention in foreign exchange. (Source: Reuters)