brand logo

‘Citi report just an agency’s view’

19 Dec 2020

. Attygalle claims Govt. never said it doesn’t need IMF

. RFI request still in place

  Sri Lanka’s Treasury is of the view that the recently released Citi Research report on the country is “just another normal rating agency’s review” as the report emphasises Sri Lanka to go for an International Monetary Fund (IMF) programme to avoid a “debt disaster”.   The report titled “Sri Lanka Economics and Strategy View” highlights the country’s debt unsustainability, although the Government is in denial, and the importance of going for an IMF programme.   Referring to the report, Treasury Secretary S.R. Attygalle told The Sunday Morning Business that the report takes on the local economic situation as if the Government has cut ties with the IMF entirely while Sri Lanka’s request for emergency financial support under the Rapid Financing Instrument (RFI) still remains.   “IMF’s support will always be there for us. Even last week we had a discussion with them. We will keep engaging with them continuously. What we are saying is that if they are extending the RFI without any conditionalities, we will go for it; if there are conditions, we will definitely not take it. Nowhere have we mentioned that we will never need the IMF,” Attygalle emphasised.   Speaking further, he noted that this is the view of theirs and what bond market investors want, but the Government would do what is best for the country’s economy.   “Bond market investors like IMF programmes and assistance. On the other hand, foreign direct investors do not care whether Sri Lanka has an IMF programme or not. What we need most is investors,” Attygalle stated.   On a further note, he added that as a country, Sri Lanka is trying not to go for an IMF programme as since 1965, Sri Lanka has obtained about 16 financial arrangements from the IMF, back to back. Nevertheless, Sri Lanka has a clean record with no repayment delays and no defaults of IMF loans.   Meanwhile last week, during a gathering, State Minister of Money and Capital Markets, and State Enterprise Reforms Ajith Nivard Cabraal stated that the conditions that are available in Sri Lanka today would not require the country to go to the IMF for any bailout. He stated that the Government is confident that the country can manage with the expected revenues and foreign inflows particularly from exports.   In early April, in the midst of the local outbreak of the pandemic, Sri Lanka requested for emergency financial support under the RFI of the IMF. However, Sri Lanka’s economic challenges and mountain of public debt are significantly delaying the review of the country’s request, as stated by Acting IMF Mission Chief for Sri Lanka Masahiro Nozaki to The Sunday Morning Business three weeks ago.   Following the global outbreak of the pandemic in the first quarter of this year, the IMF received about 102 requests from countries, seeking RFI support. As of mid-September, about 76 out of these 102 requests were approved, according to the IMF. This means that Sri Lanka was among the 20 or 30 countries that were not granted RFI support.   The 76 approved countries include a number of Asia-Pacific countries such as Bangladesh, Mongolia, Myanmar, and Nepal. On 29 May, Bangladesh was approved $ 488 million under the RFI while on 26 June, Myanmar was approved $ 237.7 million. On 3 June, Mongolia was approved $ 99 million under the RFI. The total of the approved funds under this facility was $ 31 billion by end-September.   In October, Attygalle told us that the IMF was waiting till Budget 2021 was presented in Parliament, which was done on 17 November, but said this assistance from the IMF was not desperately needed by the country.   Meanwhile, in mid-August, Central Bank of Sri Lanka (CBSL) Governor Prof. W.D. Lakshman told The Sunday Morning Business that Sri Lanka will obtain emergency financial support under the RFI, only if the support would be provided with no conditionality.   The Citi Research report noted that while officials continue to mention their willingness to pay off their debt, they cannot see a credible strategy for achieving debt sustainability and (external) repayment capacity beyond talking up their growth prospects and expecting this to attract foreign direct investments (FDIs) and other portfolio equity inflows.   “The ability of financial repression to contain domestic borrowing costs is limited by rising debt ratios, still expected to grow amid a pro-growth 2021 Budget. We expect net FDI will finance about 40% of the current account deficit in 2021 FY, and the rest will not be wholly covered by official multilateral and bilateral lending, let alone commercial funding, in the absence of an IMF policy reform backstop,” the report added.   Citi Research presented two scenarios based on whether the Government turns to the IMF or not.   “In our base case, we assume Sri Lanka’s Government will be compelled to engage with the IMF to execute the restructuring. We expect a coupon haircut of around 52% to stabilise the debt at current levels, with maturity extensions three to five years across the curve. We also assess a scenario in which Sri Lanka does not engage with the IMF due to policy differences with the fund. In this case, a successful restructuring would be difficult and exit yields would be significantly higher than the 10-11% one would see in other countries with an IMF programme,” it said.

Kapruka

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!


More News..