IMF says any loan to Sri Lanka requires debt sustainability

21 April 2022 04:14 am - 10 - {{hitsCtrl.values.hits}}

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The International Monetary Fund said discussions with Sri Lanka on a potential IMF loan program are at an early stage and any deal would require "adequate assurances" that the island country's debts can be put on a sustainable path.

In a statement emailed to Reuters, IMF Sri Lanka Mission Chief Masahiro Nozaki said that IMF Managing Director Kristalina Georgieva discussed lending options and policy plans with a Sri Lankan delegation on Tuesday.

"An IMF-supported program should be designed to resolve Sri Lanka's acute balance of payments problems and put the economy back on a sustainable growth path as early as possible," Nozaki said.

The statement came after protests in response to shortages of fuel and other essentials turned deadly on Tuesday and Sri Lanka's Finance Minister formally asked the Fund for a Rapid Financing Instrument loan for countries needing urgent balance-of-payments support.

Nozaki said the IMF is "very concerned about the current economic crisis in Sri Lanka and hardships suffered by the people, especially the poor and vulnerable."

But he noted that IMF staff had determined last month in an annual economic review that Sri Lanka's public debt was unsustainable, and the country needs to take steps to restore debt sustainability prior to any IMF lending, including the emergency Rapid Financing Instrument (RFI).

Such restoration of debt sustainability typically requires a restructuring or reprofiling of public debts, which in Sri Lanka's case would require cooperation from China, one of its largest bilateral creditors.

The IMF used the low-conditionality RFI loans extensively to assist countries during the COVID-19 pandemic and has provided such loans to ease balance of payments problems after natural disasters, conflicts and commodity price shocks.

"These considerations would need to be examined for a potential RFI for Sri Lanka, once adequate assurances are obtained that debt sustainability will be resolved," Nozaki said.

He added that the specific design of a Sri Lanka IMF loan, including program targets and conditionality, would be agreed through extensive discussions between the government and IMF staff.

"The discussions are still at an early stage," Nozaki said.

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Comments - 10

mindful Thursday, 21 April 2022 06:40 AM

They will impose lot of hard conditions now. This will be a severe burden to our country. -People who work in abroad should not use Undial/Hawala this which is now a real headache to the economy - The exporters should think about country and route the earning to SL proper way and proper time -People should understand the situation and help each other. -We should reduce our unnecessary expenses. -If we could start up the tourism industry without delay this will earn us around 1-1.5 B this year

Jude Thursday, 21 April 2022 07:17 AM

What IMF officials saying is, get rid of Rajapaksa regime then will give you loans!! Reason being Rajapaksa siblings embezzling money!! Yeah!!

New-Ard Thursday, 21 April 2022 07:50 AM

The situation would have been different if only Cabraal had never been born!!!

Sokrates Thursday, 21 April 2022 07:57 AM

In other words: There will be no loans as long as the Rajapaksas in power.

Get rid of them first Thursday, 21 April 2022 09:16 AM

No point giving a loan, if Rajapakshas are going to continue ruling.

sss Thursday, 21 April 2022 09:19 AM

Rupee rich faction living upper middle income country life style off the dollars earned by blue collar workers is also one of the reasons for the current situation. I think for the amount of vehicles in the country the fuel bill alone cost more than half the dollar earnings which is not sustainble

BuffaloaCitizen Thursday, 21 April 2022 09:38 AM

It is clear, we have come very late to IMF while we also having no single methodology in place to reduce the trajectory of damage. It also indicates, our leaders are absolutely incompetant in governance and proper decision making at the proper times. History itself indicates that, when we have used State Violence and our own armed forces multiple times to kill our own youth Citizens of the country to sort problems that would have been sorted with timely negotiations, honesty and understanding. This time, it is a disastrous lesson to Sri Lanka.

N SENA Thursday, 21 April 2022 10:48 AM

IT IS VERY CLEAR THAT, WE HAVE GONE TO THE IMF WITHOUT ANY CONCRETE PLANS. OUR TEAM CONSISTS OF NOVICES. UNDER A PROPER PLAN, IT WILL BE DIFFICULT TO LEND TO A BANKRUPT COUNTRY. WE WAITED TOO LONG (UNTIL WE BECAME BANKRUPT) TO APPROACH IMF

Dee Thursday, 21 April 2022 01:06 PM

Just asking! Does the IMF give loans to family concerns ?

sam Thursday, 21 April 2022 01:09 PM

Which means decision on loans is far away

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IMF says any loan to Sri Lanka requires debt sustainability

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