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Sri Lanka's debt woes deepen as it joins IMF surcharge list

23 February 2024 01:02 am - 16     - {{hitsCtrl.values.hits}}

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  • Subjected to surcharges following the disbursement of two tranches amounting to US$ 670 million
  • Liable to pay US$ 1.06 million in GRA Level Based Surcharges from this February

By Nishel Fernando

Sri Lanka has been added to the list of 22 heavily indebted countries facing controversial surcharges imposed by the International Monetary Fund (IMF) from recently. These additional payments, aimed at countries whose outstanding credit to the IMF’s main account exceeds 187.5 percent of their quota, have stirred debate and concern.

A recent report by the United States-based think tank, Center for Economic and Policy Research (CEPR) highlighted that Sri Lanka is among the latest additions to this list, joining countries such as Benin, Côte d’Ivoire, Kenya, Moldova, North Macedonia, and Senegal. Sri Lanka’s inclusion underscores the financial challenges faced by these nations.

Accordingly, the island nation is subjected to surcharges following the disbursement of two tranches amounting to US$ 670 million out of the US$ 3 billion Extended Fund Facility (EFF) approved by the IMF. The facility is 395 percent of Sri Lanka’s SDR quota with the IMF.

As per the Fund’s recently unveiled Query Tool, Sri Lanka is liable to pay US$ 1.06 million (SDRE 803,360) in GRA Level Based Surcharges from this February to the end of this year alone for funds disbursed so far.

The IMF’s surcharges come in two forms: level-based and time-based. Level-based surcharges are imposed when a country’s outstanding credit exceeds the specified threshold, while time-based surcharges are levied on debt outstanding for three or more years. These measures vary depending on the lending facility, reflecting IMF’s efforts to manage and mitigate risks associated with high debt levels. 

IMF’s Surcharge policy which has been in effect since 1997 has been under heavy criticism from global leaders - economists to civil organisations. Given its pro cyclical nature, CEPR elaborated that  surcharges effectively punish countries facing severe liquidity constraints, increase the risk of debt distress, and divert scarce resources that could otherwise be used to fund health care, climate action, or other social and development needs.

While surcharges were aimed at disincentivising overreliance and supporting maintaining its precautionary balances, CEPR pointed out that both arguments do not hold any validity as shown by IMF’s data.

“..the net increase of six surcharge-paying countries in less than a year, and the significant growth in total surcharge payments, indicate that this burden is only growing. These payments are unnecessary for the IMF to maintain its precautionary balances well above target levels,” it added.


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  Comments - 16

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  • Nimal Friday, 23 February 2024 02:53 PM

    The pin president always maintains that our economy is recovering. Only recovery I see is that the country has received a moratorium on its debt repayments. Would you call it economic recovery.

    Lolololo Friday, 23 February 2024 05:07 PM

    Who gives in moratoriums if the confidence is lost. There is economic recovery shown but at a snail speed. Can't jump before you crawl. Give sometime or you take over from RW for us to see it plummeting down into the drains before we could bat an eyelid. Don't criticise for Name sake. Wise people say something; fools have something to say. It's an old adage

    Sam Friday, 23 February 2024 05:19 PM

    Gona, Tell us what is your economic solution.

    Sunil Perera Friday, 23 February 2024 09:15 PM

    The question is didn't the IMF know when it extended its so called facility, that SL would have to face this situ? While many accuse China's debt diplomacy, no one seems to talk about the Western debt diplomacy, which is executed via agencies like world bank and the IMF.. Funny Isn't it?

    Muthupara Friday, 23 February 2024 09:47 PM

    Nimal another Pin gotta by Rajah clan to make vicious writing for Wijaya and Sirasa I know these bogus critics are theirs Sure mine usual not be shown.

    Cherath Friday, 23 February 2024 04:38 PM

    The reality is, the government and its President aren't too bothered about these additional surcharges exceeding $1 million as they are in their moment of last hurrah right now. The incoming government will have to adjust and readjust their financial strategies absorbing these extra obligations. So sad!

    Sam Friday, 23 February 2024 05:21 PM

    Dear Namal Tell us what your economic model for our country

    Sam Silva Friday, 23 February 2024 06:53 PM

    In otherwords if I gather correctly, We were granted a loan from imf with conditions which we will receive in installment. We received the first but to get the other We have to meet their conditions. In order to do that the government impose taxes on us. However now we have to pay a surcharge for the loan installment we received. Correct me if I am wrong.

    Bernard Jayatilake Friday, 23 February 2024 08:48 PM

    The IMF should not have come up with surcharges and categorized Sri Lanka in the group of least developed countries in an election year as the incumbent head is pinning all his hopes on the IMF loan to fool the people to win the impending presidential election as such statements would definitely throw him out of the contest which he never would have considered if not for the former ruler who ruined the country plunging it to bankruptcy and it would be naive to hope for a turnaround of the economy just he is trying to fix it on a foreign loan to free it on bankruptcy but the nation will be a debtor country for at least another ten years.

    Simon maama Saturday, 24 February 2024 02:19 AM

    What is the response of Ranil-Rajapaksa Junta on this report. Most likely another spin-doctor will be hired to hoodwink the people and the opposition.

    Buddhist Saturday, 24 February 2024 03:26 AM

    This is what Ranil has been able to achieve to date. Should he continue as the president? Under him, every single government ministry is involved in corruption.

    Joey Dissanyake Sunday, 25 February 2024 12:22 AM

    Only president who had courage to Face the problem. Do you know anybody? No Country recovered from this problem within few years. It's took Argentina to get. One million USD last month after 12 years of suffering. Is there anybody who can as you say? What's his name?

    Buddhist Saturday, 24 February 2024 03:26 AM

    This is what Ranil has been able to achieve to date. Should he continue as the president? Under him, every single government ministry is involved in corruption.

    Kevin Saturday, 24 February 2024 04:15 AM

    Are you happy now.

    suman Udage Saturday, 24 February 2024 06:12 AM

    Is this the same IMF which was here recently boasting "recovery"? That is why Greece threw out this crafty IMF. What is UNP going to say now on our miracle recovery under Ranil?

    Joey Dissanyake Sunday, 25 February 2024 12:37 AM

    There are lot of maestros commenting about recovery etc etc. But never wrote anything about solutions. Only was china. Nobody wanted it.seems chances Disappeared. India have no infrastructure to develop a another Country A-Z . US is using India to take care of it's interests and clearing,Getting everything they wants in SL using IMf also. People must show at least a small gratitude to Ranil today for his efforts. If anybody wants 100 % china/,? why Not come forward and take over. surely not a bad idea either. People can get food water,med, petroleum, electric ⚡ etc. But going to be a hardworking Era.


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