IMF reiterates support contingent on creditor assurances, reforms

• Stresses importance of funds flowing back to Sri Lanka to ease shortages, hardships on people

Reiterating its stance, the International Monetary Fund (IMF) yesterday said that the IMF-backed programme would only move forward on Sri Lanka’s resolve to stay on the reform path the officials had committed to when the two parties agreed on the staff-level deal.

Further, disbursement of any funds out of the US $ 2.9 billion package earmarked will only happen after Sri Lanka obtains debt relief from its wide range of creditors. 

Speaking to CNBC Television, IMF Senior Mission Chief for Sri Lanka Peter Breuer told yesterday that there would be regular reviews to ensure if the reforms agreed as part of the staff-level agreement remain on track. 
“The start of the programme is contingent on a number of things happening before it can be put both to the IMF management and to the IMF’s executive board,” Breuer said. 

“The authorities have committed to a number of prior actions that they will have to engage in, including starting or continuing with their economic reform process; for example, having the 2023 budget in consistent with the programme as well as working on obtaining financing assurances from their creditors,” he added.

The interim budget for the remainder of the year was explicit in signalling many new revenue- enhancing measures in the coming 2023 budget and the wealth tax could very much be part of such measures, as alluded to by IMF Mission Chief for Sri Lanka Masahiro Nozaki earlier this month. 

Sri Lankan authorities along with their financial and legal advisors are expected to present to its creditors on Friday the details of the full extent of the economic crisis, plans for debt restructuring and the staff-level deal entered into with the IMF on August 31, for a four-year Extended Fund Facility.

Responding to a question on the crippling shortages and spiralling cost of living faced by the people of Sri Lanka, Breuer said they remain concerned about these hardships and stressed the significance of fund flows coming back to Sri Lanka to ease some of the difficulties. 

He however made clear that the IMF funding would only start flowing after many prior actions by the government of Sri Lanka, as stated above. 

“It is very important that financing flows back to Sri Lanka, so that these shortages can be alleviated,” Breuer said. 
“Currently, we have agreed on a set of reforms that the authorities will engage in. The programme itself will only disburse after a number of prior actions and engagement with creditors has been completed,” he added. “At that point, once both the IMF’s management and board approves, we will be able to disburse and we hope that this will have a catalytic effect, whereby other multilateral partners will be able to come in and provide financing from their side and then more broadly confidence will be rebuilt, so that the private flows will come back to Sri Lanka,” he further said.

IMF reiterates
“It is very important that financing flows back to Sri Lanka, so that these shortages can be alleviated,” Breuer said. 
“Currently, we have agreed on a set of reforms that the authorities will engage in. The programme itself will only disburse after a number of prior actions and engagement with creditors has been completed,” he added. 

“At that point, once both the IMF’s management and board approves, we will be able to disburse and we hope that this will have a catalytic effect, whereby other multilateral partners will be able to come in and provide financing from their side and then more broadly confidence will be rebuilt, so that the private flows will come back to Sri Lanka,” he further said.