IMF concludes $2.9 billion preliminary loan agreement with crisis-hit Sri Lanka – IMF

COLOMBO (UrduPoint News/Sputnik – September 01, 2022) The International Monetary Fund (IMF) said on Thursday it had reached an agreement with the government of Sri Lanka for a loan of around $2.9 billion to support reforms economy of the country.

“The new Expanded Financing Facility (EFF) will support Sri Lanka’s program to restore macroeconomic stability and debt sustainability, while preserving financial stability, reducing vulnerabilities to corruption and unlocking growth potential. of Sri Lanka,” said IMF delegation heads Peter Breuer and Masahiro Nozaki. for Sri Lanka, said after their visit to Colombo.

According to the fund, the deal must be approved by IMF management and the board, provided the government implements the necessary actions and Sri Lanka’s official creditors provide the IMF with funding assurances.

To ensure the country’s debt stability, the authorities have put in place a program that includes tax reforms, cost-recovery pricing for fuel and electricity to minimize fiscal risks from public enterprises, as well as an increase in social spending for low-income groups and the adoption of a new banking law.

The COVID-19 pandemic has disrupted the country’s tourist flow, resulting in a shortage of foreign currency and the worst economic crisis since independence from the United Kingdom in 1948. The crisis has triggered a sharp rise in the price of food. energy and subsequent shortage of food and basic necessities, as well as constant power outages.

In April, the country defaulted on its external debt obligations, with its debt reaching $51 billion. The IMF estimates that Sri Lanka’s economy is expected to contract by 8.7% in 2022 and inflation has recently topped 60%.

When the crisis erupted, then-president Gotabai Rajapaksa fled the country after a popular uprising over economic hardship. Former Prime Minister Ranil Wickremesinghe replaced Rajapaksa and has already held several rounds of talks with the IMF team on restructuring his debt under the IMF-backed economic restructuring program.

Leslie M. Gill