Debt restructuring process being expedited

Sri Lanka is taking expeditious measures to advance the debt restructuring process with the assistance of financial and legal advisors, the Central Bank of Sri Lanka said today.

The bank said that negotiations with the International Monetary Fund (IMF) towards reaching a staff-level agreement on the Extended Fund Facility (EFF) arrangement are scheduled in the coming weeks.

The Central Bank also said that gross official reserves, as at end July 2022, are estimated at US dollars 1.8 billion, including the swap facility from the People?s Bank of China equivalent to around US dollars 1.5 billion, which is subject to conditionalities on usability.

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 17 August 2022, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 14.50 per cent and 15.50 per cent, respectively. In arriving at this decision, the Board considered the latest model-based projections, which point towards a larger than expected contraction in activity and a faster than expected easing of price pressures, compared to the previous monetary policy review.

Contractionary monetary and fiscal policies already in place, alongside the measures to curtail non urgent import expenditure, are expected to result in a notable contraction in credit to the private sector and possible upside risks to unemployment in the near term.

The Board was of the view that despite headline inflation is projected to remain elevated in the near term, the policy measures taken by the Central Bank and the Government thus far would help contain any aggregate demand pressures, thereby anchoring inflation expectations, along with the anticipated decline in global commodity prices and its passthrough to domestic prices in the period ahead. (Colombo Gazette)