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Tuesday April 16th, 2024

Sri Lanka IMF program could be 400-pct plus quota EFF: CB Governor

ECONOMYNEXT – Sri Lanka may qualify for a 400 percent of quota Extended Fund Facility from the International Monetary Fund though the exact program size will have to be decided once a financial gap is assessed, Central Bank Governor Nandalal Weerasinghe said.

“It is too early to say,” Governor Weerasinghe said in response to a question about whether Sri Lanka could quality for 535 percent of quota exceptional access at peak program from the IMF.

“They have to assess the external financing gap. In 2009 we got 400-pct of quota. I do not see why we cannot get at least that amount.

“Now the financial gap is much, much higher than what we had at that time.”

A 400 percent of quota program would put Sri Lanka’s next program at around 3.0 billion US dollars.

Governor Weerasinghe said an EFF may be the “most relevant” given the structural reforms needed.

Sri Lanka is to begin formal talks with the IMF from April 18 when a delegation visits Washington to take part in annual IMF-World Bank meetings.

Finance Minister Ali Sabry has said a billion dollars each may be disbursed over three years under Sri Lanka’s next IMF program.

By 2025 Sri Lanka’s IMF loans would fall to around 60 percent of quota, allowing a drawdown of around 470 percent of quota at the peak, in a 535 percent access program.

A recent program for Argentina, the archetypal soft-pegged defaulter, got 1200 percent quota access.

Analysts have speculated that a front-loaded Stand-by or an EFF may be assigned to Sri Lanka and have suggested that given the monetary instability that had come from flexible-inflation-targeting-with-a-peg in the past a reserve money program should be followed.


What Sri Lanka’s IMF program should look like

Under a reserve money program, complementary targets such as a floor on the central bank’s Treasury bills stock and foreign reserves can be programmed, and the rupee easily stabilized, provided interest rates are not rigidly enforced with open market operations.

Concerns have been raised that a monetary policy consultation clause in the last program compatible with FIT-with-a-peg had led to external instability and missed reserve targets and excessive foreign borrowing once forex shortages emerged as in 2018.

However, Governor Weerasinghe said Sri Lanka will stick with the (flexible) inflation targeting arrangement that has been used in the recent past. (Colombo/Apr15/2022)

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IMF urged Sri Lanka to preserve “hard earned gains” after economic crisis: State FinMin

ECONOMYNEXT – The International Monetary Fund has urged Sri Lanka to preserve the hard earned gains after an unprecedented economic crisis under the global lender’s programme, State Finance Minister Shehan Semasinghe said.

The Sri Lankan delegation led by Shehan Semasinghe met Kenji Okamura, the Deputy Managjng Director of the IMF on the first day of the IMF and  World Bank Spring meeting.

“Mr. Okamura commended the Sri Lankan authorities on strong programme implementation and excellent reform progress. He emphasised the need to preserve the hard earned gains Sri Lanka has experienced since the beginning of the IMF programme and continue strong ownership,” the State Minister said in his X (Twitter) platform.

He said the Sri Lankan delegation including Central Bank Governor Nandalal Weerasinghe and Secretary to the Treasury Mahinda Siriwardana explained the recent socio-economic developments to Okamura.

He also affirmed the IMF top official on the authorities’ commitment to ensuring continuity and consistency of macroeconomic policies and reforms undertaken under the programme. (Colombo/April 16/2024)

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Sri Lanka State FinMin meets BCIU in US; discusses post-crisis investment prospects 

ECONOMYNEXT – Sri Lanka’s State Finance Minister Shehan Semasinghe met Business Council for International Understanding( BCIU) in Washington on the sideline of the IMF/World Bank Spring Meetings late on Monday and discussed investment prospects in the island nation which is gradually recovering from an unprecedented economic crisis.
“Our discussion centered on the potential that Sri Lanka offers for international investors. Explored various sectors, including education, tourism, renewable energy, agriculture and technology, where strategic investments can drive sustainable economic growth and development,” Semasinghe said in his X (Twitter) platform. 
“We reviewed the current macro-economic landscape of Sri Lanka, including recent reforms that have transformed to results. Glad to concluded the forum by marking constructive dialogue and a shared commitment to support the economic development of Sri Lanka.” 
“We thank participants, stakeholders holders and global partners for the significant interest shown in unlocking the full potential of the Sri Lankan economy and fostering greater international understanding and cooperation.” (Colombo/April 16/2024) 
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India allows Sri Lanka to import 10,000MT of onions

ECONOMYNEXT – India has relaxed an export ban allowing 10,000 metric tonnes of onions to be shipped to Sri Lanka, the Indian High Commission in Colombo said.

“The exemption for Sri Lanka reiterated India’s Neighbourhood First policy, adding to the Sinhala and Tamil New Year festivities here,” the statement said.

Onion prices went up in Sri Lanka after India and Pakistan banned exports.

The Directorate General of Foreign Trade has issued a notice allowing National Co-operative Exports Limited to ship 10,000 MT of onions.

The UAE has also been allowed to import 10,000MT of onions on top of 24,400MT already permitted.

A large Indian and South Asian expat community lives in the UAE. (Colombo/Apr15/2024)

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