Sri Lanka secures $1.5 billion IMF loan to help bolster finances

The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in WashingtonSri Lanka reached an agreement with the International Monetary Fund for $1.5 billion in loans to help lower its borrowing costs and bolster finances, Bloomberg reported.

Sri Lanka has pledged to narrow its fiscal deficit to 3.5 percent of gross domestic product by 2020 through “a comprehensive set of reforms to Sri Lanka’s tax system,” the Washington-based lender said in a statement. The loan program will need approval by the IMF’s executive board, which is due to consider it in early June.

Once approved, it’s “expected to catalyze an additional $650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion, over and above existing financing arrangements,” the IMF said.

Sri Lanka was looking for a loan of as much as $1.5 billion from the IMF as a seal of approval for the government’s policies in order to help draw further foreign inflows, central bank Governor Arjuna Mahendran said in an interview last month.

The government is seeking to sell as much as $3 billion of bonds in international markets this year after refinancing concerns prompted Fitch Ratings to downgrade the nation and Standard & Poor’s to cut its rating outlook to negative.

The rupee is trading near a record low after worsening foreign-exchange reserves and balance of payments forced the central bank to stop propping up the currency.

“The government is committed to dealing quickly with the legacy of Sri Lankan Airlines, which continues to represent a drain on public finances after years of mismanagement,” the IMF said. Going forward, key state firms will be governed transparently by annually published statements of corporate plans, it said.
Sri Lanka has pledged to ensure that the pricing of electricity and fuels is guided by the market, with subsidies needed to protect the poor being better targeted and clearly reflected on the government’s budget, according to the IMF.

“The central bank will shift toward a flexible inflation targeting regime while also undertaking measures to help deepen foreign exchange markets and support a durable transition to a flexible exchange rate regime,” according to the statement.

Sri Lanka last sought an IMF loan in 2009 following the end of a three-decade old civil war and under the leadership of Mahinda Rajapaksa, to bolster its international reserves. It received the final tranche of the $2.6 billion IMF loan in 2012. (Colombo Gazette)

3 COMMENTS

  1. The IMF apply wrong policies approved by that UNP- current policies and encourage are not suited to development and democracy of capitalism an Island country that last 16 months since 2015 January 9th; as follow
    1 Property loans and other lost credibility of monetary policies.
    2 Stock and foreign securities lost totally.
    3 Domestic Bonds having inside Trading in two time that ignored by IMF authorities. Result of that artificial increased of Interest RATE in Central bank badly effect and impact of new inflation trend of all commodity price and
    re-investment in capital expenditure.
    Result of that an economy is not moving ,still stagnated, and more on fickle of investment income.

    Indeed Domestic Bonds negative rates are badly effects to the developing economy no doubt a weight bear by UNP handful leadership in Central Bank political manipulation of seeking funds for regain political power in buying votes and their parties of propaganda and agitations of UNP to come power 2015 August 17th Elections in 2105.

    The IMF outfits due to that political pressure from USA, UK and Japan has been over rule or over ride accountability of International rules and norms governance against Sri lanka.

    By and large Sri Lankan current authority that misusing an issuing domestic bonds against norms and its guided principle of application IMF and Central banks of World ,which that mismanagement of National Economy last 16 months other risks could manifest sooner. That key issue not been address by IMF ruling circulars.

    It has extra risk has appear in the PRICE FACTOR AND DEVELUATION OF CURRANCY OF RUPPES IS DOWN 15 MONTHS SINCE 2015 JANUARY 9TH THIS YEAR GAINST DOLLAR,WHICH MEANS ITS FOREGIN PURCHASES ARE DINGED.

    THE MUCH OF OVERSEEES BUYING BY SRI LANKAN STOCKS WAS NOT HELP THEM TO HAVE FUNDING BASE IN RUPPE CURRANCY-SRI LANKA.

    The investment in developing sustainability of capitalism and basic need of infrastructure over next few years has totally lost by UNP -Ranil W,, mismanagement of wrong fiscal and monetary by wrong action of Tax and Investment policies are wrong handling by UNP eldership of Ranil .W…Samarawicrakam, Ravi K.. and other trading partnership of oversees concern parties.

    In current lack of room for class action of lawsuit clamming it authorities domestic bond inside trading issues has been hide by covered operation by Govt-UNP in high hand power. Power has force us to lost monetary and fiscal democracy and its transparency in Sri lanak.

  2. After this loan, Sri Lanka will have to dance according to their songs. Most of the money also will be taken back as Admin fees and we have to learn lessons from the past. Rajapaksa became an enemy because he did not beg from IMF.

    • Yea right! he begged from China and made sure his coffers are full to generations to come. Ah – ah I slipped up Tsunami money was a another gift to his clan.

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