The International Monetary Fund (IMF) yesterday said that a top-level delegation from its headquarters will visit Sri Lanka from August 24 to 31 to make progress towards reaching a Staff-Level Agreement on a prospective Extended Fund Facility (EFF) arrangement in the near term.
“The IMF staffers plan to visit Colombo from August 24-31 to continue discussions with the Sri Lankan authorities on economic and financial reforms and policies,” the IMF said. The IMF statement noted that since Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the EFF program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored.
IMF staff would also continue to engage with other stakeholders during the visit. The team will be led by Peter Breuer and Masahiro Nozaki and will be joined by IMF’s Resident Representative in Colombo, Tubagus Feridhanusetyawan.
The talks between the Government and the IMF were earlier put on hold due to the unrest that prevailed in Sri Lanka prior to the resignation of former President Gotabaya Rajapaksa. Sri Lanka defaulted on its US$ 51 billion foreign debt in April and is seeking a bailout package from the IMF due to the foreign exchange crisis that led to food, fuel and medicine shortages. Critics said that the Rajapaksa administration had avoided going to the IMF, thus precipitating the foreign exchange crisis.
India has promised to extend all assistance to Sri Lanka during the IMF process. “Any help we can give to Sri Lanka at the IMF that we will naturally do,” NDTV quoted Indian External Affairs Minister Dr. S. Jaishankar as saying on its website. India has extended around US$ 4 billion in support to Sri Lanka including Lines of Credit (LoC) and currency swap arrangements to tide over the recent difficulties.
Amid these developments, the Central Bank of Sri Lanka (CBSL) warned on Thursday that the local economy could suffer a contraction of over eight percent this year with inflation reaching 65 percent. Governor Dr. Nandalal Weerasinghe said that negotiations with the IMF have made good progress so far and the talks would continue after the IMF team’s arrival in Sri Lanka on August 24.
“A number of decisions had been taken to improve Sri Lanka’s economy and they are now seeing the result of such decisions,” Governor Weerasinghe told the media on Thursday.
The Governor said that inflation driven by demand has lessened because the CBSL has controlled the expansion of loans, and supply side inflation will drop with price and foreign exchange stabilisation.
Dr. Weerasinghe said that the severe shortage in foreign exchange has improved and the country is now in a position to import adequate stocks of fuel, gas and medicines.
“Imports have lessened. Export revenue has somewhat increased. Even without short term loans we have been able to cover our basic needs. This is a positive development,” he added.
The Central Bank has introduced several new measures to encourage migrant workers to remit money via formal channels while cracking down on illegal transfers through Undiyal and Hawala methods. The CBSL took measures to introduce rules in respect of repatriation and conversion of export proceeds to Sri Lankan rupees.