IMF remains only hope for Sri Lanka to emerge from crisis: CB Governor

25 October 2022 06:00 am - 16 - {{hitsCtrl.values.hits}}

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President’s Media Division Director General Dhanushka Ramanayake in discussion with Central Bank Governor Dr. Nandalal Weerasinghe

Says Sri Lanka has made good progress in restructuring debt at IMF meetings held a fortnight ago
“Had we acted earlier, we could have attempted other things,” says Dr. Weerasinghe referring to SL’s bleak foreign reserves position
SL expects to obtain financing assurances from its creditors by Dec. and activate US $ 2.9bn IMF bailout package by Jan. 2023

The economic rescue programme with the International Monetary Fund (IMF) remains the only path available for Sri Lanka to emerge from the prevailing economic crisis, as no one else is ready to bail out Sri Lanka, according to Central Bank Governor Dr. Nandalal Weerasinghe.

Sri Lanka plunged into its worst economic crisis in March and announced a debt default in April after Weerasinghe’s immediate predecessors followed what was referred to as a ‘home-grown solution’, through which they attempted to bridge the budget deficit via domestic borrowings while trying to narrow the deficit in the balance of payment through bilateral funds.

“As far as I can see, this (IMF) is the only way out once we come to this level,” Dr. Weerasinghe said referring to the country’s bleak external reserves position, which compelled Sri Lanka to announce a debt default in April.

“Had we acted earlier, we could have attempted other things. Once our reserves fall to this depth and when no one else is ready to give us any loans, the IMF remains the only window for us as a member country to obtain some kind of a loan,” he added.

In a one-on-one discussion with President’s Media Division Director General Dhanushka Ramanayake last week, to make sense of the prevailing economic condition and the most recent tax hike, which caused some outrage, Dr. Weerasinghe said the tax reforms remain at the forefront among the slew of reforms to fix the budget deficit, which is partly responsible for Sri Lanka’s economic meltdown.

Sri Lanka ran blow-out budget deficits over 11 percent of gross domestic product for two consecutive years, partly caused by the necessity to provide stimulus to those who were affected by the prolonged pandemic.

However, the financing of the deficits was nearly entirely done through the Central Bank liquidity or printed money, as Sri Lanka lost access to international debt capital markets in early 2020, after the rating agencies cut the sovereign rating on heightened concerns of debt sustainability, largely due to the sweeping tax cuts in late 2019.

While excessive money printing partly caused the current bout of runaway inflation, global commodities price boom created by supply chain bottlenecks, Russia-Ukraine war and the strengthening of the US dollar against the other currencies also have contributed.

Speaking of the progress made on restructuring external debt, Dr. Weerasinghe said the team has made very good progress on that front at the IMF meetings held in Washington a fortnight ago.

“We made very good progress at the IMF meetings last week on debt restructuring,” he said.

Financing assurances, first by bilateral lenders led by India, China and Japan and then by private creditors, remain a key sticking point in activating the US $ 2.9 billion Extended Fund Facility with the IMF.

Restructuring of debt involves maturity extensions and relief during the first couple of years in debt service payments until the country regains its ability to repay its debt.

Sri Lanka is hopeful of obtaining financing assurances from its bilateral creditors by December this year to activate the IMF deal in January, which will then open up avenues to unlock other multilateral and bilateral funding to the country, partly enabling to alleviate the current hardships faced by the public.

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Comments - 16

M Fernando Tuesday, 25 October 2022 07:09 AM

This governor has zero imagination. What about MaRa Disneyland ? It will bring 8 times more money than the paltry 2.8Bn dollars from IMF (according to Dyana Gamage, of course)

Sambo Tuesday, 25 October 2022 07:20 AM

But sir! while we are running behind the world bank and as public have to drink their bitter medicine just for 2.9 billion dollars why also not chase behind the billions looted by a few politicians which bigger money.

Sinna Tuesday, 25 October 2022 07:27 AM

It’s obvious who ruled the country in past two decades looted according to their whims and fancies, before hold your shameless bagging bowl to IMF and other rich countries and forcing innocent public to pay taxes which is making their life more miserable but find ways to Rajapakshas to pay back swindled money,better persuade them to do voluntary, or soon people will grab them all by force

Athk69 Tuesday, 25 October 2022 08:43 AM

Pls don't demand tax from people who have megre earnings. Rs 100,000 isn't enough to feed a small family. If taxed, more people will be pushed to poverty and won't live to see the country recover.

Punchi Tuesday, 25 October 2022 08:44 AM

We have all these splendid Temples and numerous venerable Monks upon whom we shower at state expense luxury cars, foods, stipends, luxury accommodation etc. Why is it they are unable to invoke Buddha for whom they have encouraged us to shed blood to provide an alternative financial path by bestowing upon us infinite amounts of US dollars, Riyals, Dinars, Yen etc.

joshua Tuesday, 25 October 2022 08:45 AM

All this because of two headless fellows running the Finance and CBSL under the SLPP. Zero economics knowledge contributed to this unfortunate issues. Now we have to dance to IMF music to get the precious money. One of those fellow thought he has 7 brains. Nonsense

Roshanaly Tuesday, 25 October 2022 09:35 AM

Why not, if you can bring back the looted money. That will never happen with the present Government.

Allen Selwyn Tuesday, 25 October 2022 09:35 AM

No one else to bail out Silly Lanka - I wonder why!

Terrence Tuesday, 25 October 2022 09:53 AM

You maybe right but what about Cabral who was adamant in not seeking IMF support. All of you are deaf to cries of middle and low income earners who cannot eke out a living because of the folly of one man supported by politicians who do not know head or tail in running an economy who have brought this economic disaster

Gvallasamy Tuesday, 25 October 2022 11:02 AM

Sri lanka will be saying the same thing for the next ten years , so many highly educated muppets in sri lanka government but do not have brain cell between them all. The politicians and corrupt government officials would rather take bribes to enhance their own lives , run and leave sri lanka for any foreign country as quickly as possible rather than do the right things to improve the future of sri lanka

Premalal Perera Tuesday, 25 October 2022 11:12 AM

What a lot of BS from the Governor. The only hope for this country is its people and not the IMF. The IMF will give more loans to an already indebted country. The country will be salvaged by the people who will have to bear crippling taxes. All this while the plunderer of the Central Bank calls himself the President while the rest carries on robbing with impunity. The tragedy is that we have high and mighty civil servants who had presided over all malpractices and still utters absolute BS.

Down the prices Tuesday, 25 October 2022 06:28 PM

While inflation is rampant, and value of rupee falls the dollar-rupee exchange rate doesn't change. It's a dirty fix done by Nandalal Weerasinghem, Mr want to give haircut to others. No one in their right minds would want to put in dollar investment here when they known their dollars are already worth three times as much in rupees compared to official rate. Next month inflation will show another double digit, but dollar-rupee rate will stay as is... Eventually this fantasy created by Nandalal Weerasinghe of high value rupee will come crashing down, and it will be all the worse longer it takes to happen.

Ram Tuesday, 25 October 2022 01:53 PM

Our only hope is slipping away with the conduct of out President in remanding the protestors using PTA and failure to take steps to find the robbed money with a view to collect them

Beggar Tuesday, 25 October 2022 02:18 PM

Now there is a mega Cabinet and an even bigger Gang being called State Ministers who are squeezing the necks of the suffering public by using up the little resources available in the country.The CB Governor with the begging bowl is pleading with the IMF to get a little Dollars. Is there any rationale in this

Bryan Ekenaike Tuesday, 25 October 2022 02:22 PM

Can someone please explain how billions of rupees are in the forefront of an investigation into a big company at World Trade Centre when the country is facing bankruptcy. By the way this same company is within shouting distance of the Central Bank

Action for freedom Tuesday, 25 October 2022 06:37 PM

No. Your seeking logical, honest answers on what really matters in a country where a religion is in the constitution shows you're another of the gullible masses. Plenty other corruptions to good democracy too here. If you come to your senses, you figure if you would dare to get on the streets when there's another Aragalaya to make a difference. However, you risk physical harm if you dare, so you better of courage about it.

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IMF remains only hope for Sri Lanka to emerge from crisis: CB Governor

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