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SL secures IMF staff-level pact for US $ 2.9bn EFF facility

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1 September 2022 10:53 am - 34     - {{hitsCtrl.values.hits}}

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The International Monetary Fund (IMF) and Sri Lankan authorities have reached a staff-level agreement to support Sri Lanka's economic policies with 48-month arrangement under Extended Fund Facility (EFF) of about US$2.9 billion, the IMF said.

Following is the full statement issued by the IMF


An IMF mission led by Peter Breuer and Masahiro Nozaki visited Colombo from August 24 to September 1, 2022 to continue discussions on IMF support for Sri Lanka and the authorities’ comprehensive economic reform program.

At the end of the mission, Messrs. Breuer and Nozaki issued the following statement:

“The Sri Lankan authorities and the IMF team have reached staff-level agreement to support the authorities’ economic adjustment and reform policies with a new 48-month Extended Fund Facility (EFF) with a requested access of about SDR 2.2 billion (equivalent to US$2.9 billion).

“The new EFF arrangement will support Sri Lanka’s program to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, reducing corruption vulnerabilities and unlocking Sri Lanka’s growth potential. The agreement is subject to the approval by IMF management and the Executive Board in the period ahead, contingent on the implementation by the authorities of prior actions, and on receiving financing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors. Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.

“Sri Lanka has been facing an acute crisis. Vulnerabilities have grown owing to inadequate external buffers and an unsustainable public debt dynamic. The April debt moratorium led to Sri Lanka defaulting on its external obligations, and a critically low level of foreign reserves has hampered the import of essential goods, including fuel, further impeding economic activity. The economy is expected to contract by 8.7 percent in 2022 and inflation recently exceeded 60 percent. The impact has been disproportionately borne by the poor and vulnerable.

“Against this backdrop, the authorities’ program, supported by the Fund, would aim to stabilize the economy, protect the livelihoods of the Sri Lankan people, and prepare the ground for economic recovery and promoting sustainable and inclusive growth.

“Key elements of the program are:

  • Raising fiscal revenue to support fiscal consolidation. Starting from one of the lowest revenue levels in the world, the program will implement major tax reforms. These reforms include making personal income tax more progressive and broadening the tax base for corporate income tax and VAT. The program aims to reach a primary surplus of 2.3 percent of GDP by 2024.

 

  • Introducing cost-recovery based pricing for fuel and electricity to minimize fiscal risks arising from state-owned enterprises. The team welcomed the authorities’ already announced substantial revenue measures and energy pricing reforms;
  • Mitigating the impact of the current crisis on the poor and vulnerable by raising social spending, and improving the coverage and targeting of social safety net programs;
  • Restoring price stability through data-driven monetary policy action, fiscal consolidation, phasing out monetary financing, and stronger central bank autonomy that allow pursuing a flexible inflation targeting regime. A new Central Bank Act is a cornerstone of this strategy;
  • Rebuilding foreign reserves through restoring a market-determined and flexible exchange rate, supported by the comprehensive policy package under the program;
  • Safeguarding financial stability by ensuring a healthy and adequately capitalized banking system, and by upgrading financial sector safety nets and regulatory standards with a revised Banking Act; and

Reducing corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, and conducting an in-depth governance diagnostic, supported by IMF technical assistance.

“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Prime Minister Dinesh Gunawardena, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, Secretary to the Treasury K M Mahinda Siriwardana, and other senior government and CBSL officials. It also met with Parliamentarians, representatives from the private sector, civil society organizations and development partners.

“We would like to thank the authorities for their candid approach and warm hospitality and are looking forward to continuing our engagement in support of Sri Lanka and its people.”


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  Comments - 34

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  • S. Samarakoon Thursday, 01 September 2022 11:16 AM

    Thank you RW. Great Leader. MR and family must be made accountable for what they did sooner than later !! Must ask him...SAPADA!!

    jim kuru Thursday, 01 September 2022 11:36 AM

    Where are we heading for Loans,

    Sambo Thursday, 01 September 2022 11:36 AM

    What about finding the culprits who have stolen all the peoples dollars and the wrong decisions made by our so called pundits.

    Free the peg Thursday, 01 September 2022 11:37 AM

    IMF wants a 'restoring a market-determined and flexible exchange rate'. I wonder if they think the current peg is anything like that. If they do, then all the other elements they want in their program is non-credible. How come CBSL has not yet allowed fully flexibly exchange rate. All other measures are good, but flexible dollar rate is essential. It stops a lot of dollar holders from bringing in the dollars here, in whatever way. These can be either our own Sri Lankans working elsewhere or tourists even.

    Anton Thursday, 01 September 2022 11:43 AM

    With old corrupt crooks in government, will this go well? Strange if IMF didn’t lay down any requirements for those that will govern the funds. Commission to politicians should be banned and utilization of the funds should be completely transparent. A mechanism to monitor the use of the funds by IMF staff must be in place. Otherwise no change.

    Cholmondeley Pinto Thursday, 01 September 2022 11:46 AM

    The pain and shock including the wait in fuel ques is worth it. The public know the Realty now. All political nonsense and corruption must stop now. Let's work together and and not just get out of this rut but build it into a developed country. Good start Ranil,Harsha and the lot .

    Punchi Thursday, 01 September 2022 12:19 PM

    Too many preconditions regarding other creditors, hardly enough to fix our problems and money to come at a distant time. Round 1 goes to the IMF

    Maha Janaya Thursday, 01 September 2022 12:25 PM

    Get ready to see fireworks. 225 must be getting ready to secure their share. Remember, we are watching.

    S.P.Ramkumar Thursday, 01 September 2022 12:25 PM

    We hope that our country will became normalcy, hunger should be wipe out.

    Pxx Thursday, 01 September 2022 12:44 PM

    No matter how much SJB, JVP and Peretto tried to prevent this, how much they lied, but Ranil was finally proven to be the man. Be patient. Ranil will rebuild this country.

    Shar Thursday, 01 September 2022 12:56 PM

    Fully Agree. Ranil is Capable. I hope the unholy student elements, jvp as well as saji

    Nilantha Thursday, 01 September 2022 12:58 PM

    This Overstaffed money wasting Government sector is the Root cause of all of this country's main and only problem...and 3$billion going to fix it ...nope it is going to be wasted away. Only way out getting rid of 60% of Government Staff ASAP

    No more tax man Thursday, 01 September 2022 01:24 PM

    Get rid of SOEs and inefficient government servants else we will be in mess in another few years

    Citizen Thursday, 01 September 2022 01:29 PM

    This 2.9 b will vanish in no time and SL will be back to 0 as all loss making gov institutes and ministry will eat the loan.

    Reader Thursday, 01 September 2022 01:35 PM

    Let's wait for Sajith's response. He appeared to be trying to frustrate the administration hoping perhaps that the government and the country would grind to a complete halt through foreign exchange availability suffocation. Too bad for them things are not working out the way they worked towards for their petty political opportunism. Any it is not too late to join hands in unity even now for the sake of the country and its people. Otherwise the dogs will keep barking while the caravan moves on.

    Lumbini Thursday, 01 September 2022 01:36 PM

    Ranil has not solved the problem. This package is just a temporary remedy. While protecting corrupt politicians and the corrupt system, Ranil actually destroyed the hopes of people in this country.

    Mahila Friday, 02 September 2022 09:37 AM

    What hopes did he manage to destroy// News that people had hopes, by electing the same corrupt lot of Robbers, sorry Looters with 2/3rd majority again, after all mismanagement up to 2014? They did it because they don't believe that these clowns from Medamulana and acolytes looted the coffers and paved way for bankruptcy??!! The 1st and foremost hope they must demolish and take-off the ‘SCREEN’, is ever re-electing anyone of those scoundrels??!! Then and then only all would be good and dreams will become REALITY!! If not doom and gloom of hopes!! Never ever, make that same blunder!!!??

    Dee Thursday, 01 September 2022 01:45 PM

    Some people are not going to be happy about this!

    Mahila Friday, 02 September 2022 10:16 AM

    True and fully agree??!! They would want to elect the R Bros. Inc. and they would undo it again??? How to be happy, immaterial, which side of political divide?? High-time, people individually and collectively decide, whether, they like to undergo the pain of last 9 months again and have R Bros. Inc. "Band Chun" affair by electing the robbers?? Hard question for some indeed, but a necessary one too?! If ever you contravene then, "KAPUT" for all?! If you choose the ‘Daemon’ beware and be prepared to face consequences!?? X’mas Happens once a year, Not always!!!

    Lumbini Thursday, 01 September 2022 01:55 PM

    Be aware of IMF haters of Rajapaksha's inner circle. Wasu, Dinesh, Wanshe, and the gang have to be thrown into the sea. Never believe those independent or neutral clowns and greedy opposition. Neither is an Amdon heroic. What is most important in this DM reporting is:- "Reducing corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, and conducting an in-depth governance diagnostic, supported by IMF technical assistance. " THIS SCRUTINIZATION HAS TO BE DONE FOR EACH AND EVERY TRANSACTION OF THIS LOAN.

    Fathima Lai Thursday, 01 September 2022 02:08 PM

    It's only a loan that needs to be repaid. We need to restructure the public sector and develop the tourism sector. The private sector is doing good on its own or obviously, they die a natural death. Wastage and corruption happen mostly in the public sector from top to bottom because workers don't care if their depts make a loss or profit, there is govt to rescue those depts from public funds even by hiking electricity/water bill by 100% for ordinary people.

    Karalasingam Sivalingam Thursday, 01 September 2022 02:14 PM

    The salient feature of this agreement is to create a corruption free administration which should be for SriLanka 's economic development.

    Nish Thursday, 01 September 2022 02:25 PM

    Well this is just an agreement to do things in return of $2b. Nothing about Ranil. People need to understand that the ball is now in SL court. Specially, the focus needs to be on clamping down on corruption, economic reforms including reforming loss making State institutions and reducing the ballooning public service. That is the challenge. IMF is not stupid and SL can't fool it. Money will only come after these hard decisions. That is the way it should be. Time will tell.

    Iwazaru Thursday, 01 September 2022 02:29 PM

    The people commenting praising Ranil do not seem to have read the whole article as they very drowned by joy. Please read the conditions. The US $ 2.9 billion comes is small installments based on how Sri Lanka meets the conditions layer down by the IMF. So sit back and relax and enjoy the fun.

    All dependant on creditor Thursday, 01 September 2022 02:37 PM

    I am surprised that nothing in mentioned about creditors. Since they are owned at last I saw 65 billion USD, with their missed interest payments. Now our government and Central bank has this signed, the creditors are in a better position to demand whatever they want. If one of the creditor refused to take any cut what our country owes them, say like a US pension fund, who has taken our government to court, then this IMF deal is worthless. In that way, the government making big with this almost propaganda of it's success could backfire if creditors behave rationally. That is to make the most of the situation for themselves. We will face a lot tougher conditions if government has to re-negotiate with IMF without creditor support.

    Mahila Friday, 02 September 2022 10:41 AM

    So, be on defaulting loans, some Good Samaritan would lend food, fuel and essentials on 'Gratis' and live ever after??!! Sri Lankans would be the Basket Case of the world and you would get tourists only from Ukraine the 'Low Spender', Backpackers!!!?? Give up all luxuries to live on “Shoestring budget”!!??

    Ball in our court now Thursday, 01 September 2022 02:40 PM

    China really will have the upper hand now. We have gone all in with the IMF, and now one of their high interest charging banks can just refuse wait longer for payment, throwing a spanner in the works of this agreement. What happens if any dependency for this agreement to happen doesn't happen. What bad position will we be in with our government rushing in for this agreement?

    Ram Thursday, 01 September 2022 03:03 PM

    Ranil will be stuck in showing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors. China has already backed out of negotiations. We are back to square one

    Surain Thursday, 01 September 2022 03:07 PM

    Those who are over joying this is a loan We all know how Ranil wasted US$ 1200 million money received from China after they sold Hambantota sea port no one knows to date However this is not coming on a platter but in installments during next 2 years

    DW Thursday, 01 September 2022 03:10 PM

    Do not let MR reach even 10 miles close to this money. We all know what happened to tsunami funds.

    janp Thursday, 01 September 2022 03:24 PM

    Who's Is Capable of Handling these RECOVERY PROCEEDINGS Instructed by IMF OFFICIALS AS THERE IS ONLY SAME OLD CORRUPTED ROGUE'S WHO'S HAS ABSOLUTELY NO KNOWLEDGE OF ENTIRE ECONOMIC PLANNING

    Says totally dependant on action with creditors Thursday, 01 September 2022 07:40 PM

    The part of dependency on creditors should be made more apparent. Seeing the following was like a knock on the head to see reality: "contingent on the implementation by the authorities of prior actions, and on receiving financing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors. Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps."

    Jef Friday, 02 September 2022 09:52 AM

    We can breath little rather than dying suffering..very good lesson for all sri lankans who lives here we must firstly thank IMF providing surport and a Solid Road map for recovery its not easy task given the Reputation of our politicians government officials back ground for mismanagement corruption elegal activities bribery etc..that contributed to the massive mess financialy BANK CRUPT THE COUNTRY if not for our President and the team we would have been even in worse situation tomorrow great work hope lessons are learned sri lanka must take full responsibility

    Jef Friday, 02 September 2022 09:52 AM

    We can breath little rather than dying suffering..very good lesson for all sri lankans who lives here we must firstly thank IMF providing surport and a Solid Road map for recovery its not easy task given the Reputation of our politicians government officials back ground for mismanagement corruption elegal activities bribery etc..that contributed to the massive mess financialy BANK CRUPT THE COUNTRY if not for our President and the team we would have been even in worse situation tomorrow great work hope lessons are learned sri lanka must take full responsibility


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