Sri Lanka program expires June 02, interest in ‘range of options’ later: IMF

ECONOMYNEXT – A final review of Sri Lanka’s existing program with the International Monetary Fund may happen in April, as long as there is enough time after elections, and the country has expressed interest in a ‘range of options’ thereafter an official said.

“The seventh and final review under the EFF arrangement is scheduled to take place after mid-April,” IMF Mission Chief Manuela Goretti said in a response to an emailed query.

“The arrangement itself expires on June 2 and, given with the forthcoming elections in late-April, the necessary conditions would need to be in place with sufficient time for the review to conclude.”

Based on preliminary data Sri Lanka has missed key quantity targets for the budget deficit and forex reserves, IMF has said.

Sri Lanka’s central bank was to receive around 118 million special drawing rights in the last tranche in a total 1070 SDR program. IMF money does not go to the Treasury.

Analysts had warned that Sri Lanka may miss the IMF reserve target after monetary policy reversed around July 2019 and liquidity injections were made absolutely and also in an ‘operation twist style’ exercise.

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Goretti said Sri Lanka expressed in interest in a range of options after the current program expires.

The IMF typically provides ‘stand-by’ programs or bailouts with policy corrections when a central bank which operates a soft-peg experiences a run on reserves after liquidity injections and the currency collapses as well as reform oriented longer programs such as the Extended Fund Facility that is drawing to a close.

“Sri Lanka and the IMF have a long history of close engagement,” Goretti said. “During the recent staff visit, the authorities expressed interest in a range of options for future engagement with the Fund.”

Sri Lanka’s central bank Governor W D Lakshman said earlier this week a follow up program may take palce ‘later on’.

“The IMF is not treated as an enemy of this country,” Lakshman said.

“And the idea we have is perhaps to talk with them later on and develop a program within the kind of policy framework we agree, as long as that is permitted.

“On that basis I think there would be a discussion for a new program. Whether it is finalized easily is yet to be decided.”

(Colombo/Feb13/2020)