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Ball now in IMF’s court, says Ranil

Ball now in IMF’s court, says Ranil

3 months ago

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  • Says letter of agreement sent to IMF following financial assurance received from Chinese Exim Bank, hopeful of 1st WB/ADB tranche by end-March, requests all to understand crucial econ reforms and claims disruption will push SL to “very dangerous state of unprecedented woes” 
  • IMF notes SL’s receipt of financing assurances from all major bilateral creditors, Board to consider decision on Staff Level Agreement EFF financing on 20 March

President and Minister of Finance, Economic Stabilisation and National Policies Ranil Wickremesinghe said that the Government has, following the submission of a letter of agreement to the International Monetary Fund (IMF) in the wake of the receipt of financial assurance from the Exim Bank of China on Monday (6), fulfilled its duties and therefore, hopes that the IMF will keep up its end of the bargain with the first tranche of bailout financing from the World Bank (WB) and the Asian Development Bank (ADB) by the end of this month  

“I discussed with the Managing Director of the IMF Kristalina Georgieva on the fund facility by the IMF on 2 March. On Monday, I discussed with the Secretary of the Treasury of the United States (US), Janet Yellen as well. We received a letter of financial assurance from the Exim Bank of China on Monday night. Accordingly, on the same night, the Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe and I signed the letter of agreement and forwarded it to the IMF. Now, our duties are done. I hope that before the end of this month, by the fourth week, the IMF will do its duty. After that, we get the first round of money from the World Bank (WB) and the ADB. The country’s income situation should be considered especially by mid-June. Accordingly, it is from there that decisions could be made. Once the IMF agreement is reached, the agreement would be tabled in Parliament. I request the House to accept it or give an alternative. Following that, we will bring a new draft on the Government’s way forward and a roadmap. I will also give it to the National Assembly. I will present a long-term and mid-term plan after the Parliament has discussed and reached an agreement on it,” President Wickremesinghe stated while giving a speech in Parliament yesterday (7).

He noted that the agreement with the IMF is of special importance to restore the economy, as there is no alternative path to be seen at present and since the failure to fulfil the tasks agreed upon with the IMF (revisions to the electricity tariffs and fossil fuel prices, ensuring the independence of the CBSL, increasing interest rates to control inflation, reforming public enterprises, strengthening the social safety net, increasing public revenue and controlling public expenditure, expanding competition in the petroleum and electricity sectors, etc.) would result in the hindrance of foreign economic activities and having to repay loans to foreign countries and private banks.

“This time, there is no room for failure in completing every task agreed upon with the IMF, unlike the 16 previous occasions. If Sri Lanka fails to fulfil the tasks agreed upon with the IMF, it could result in the IMF discontinuing its collaboration with the country, and this could in turn lead to other multilateral and bilateral financial institutions being unable to work with Sri Lanka. Accordingly, if the existing agreement with the IMF is breached, foreign economic activities will be largely hindered, and we would have to pay loans taken from foreign countries and private banks. An annual amount of approximately $ 6 billion to $ 7 billion of foreign loans are due to be paid until 2029, and we do not have the foreign exchange to pay this debt. Thus, we need the IMF to continue the agreed debt sustainability discussion with foreign creditors. The agreement with the IMF is of special importance to restore our economy, and there is no alternative path to be seen at present.”

He added that while the economic problems that existed since June 2022, have gradually been resolved to a certain extent, there are also indications that the situation in the tourism industry is improving along with a tendency for the foreign exchange remittances to show an increase even though Sri Lanka still faces a shortage of foreign currency to import inputs that could also help boost export earnings. He observed that the US dollar price is going down and that before long, US dollars will be available. 

“I am aware of the hardships that the people of this country had to suffer. As a Government, we apologise for that. However, this situation should be maintained for a short period of time. Economic reforms are crucial to move forward, and it is important for everyone in the country to understand this. Various influential groups, including political parties, voluntary organisations, and trade unions, should consider this deeply. Otherwise, if this programme is disrupted, the country will be pushed to a far more dangerous place than the state it was in during February-March, 2022. However, if the groups that can influence the society disrupt the programme that we have proposed through various measures, the social alternative that will emerge from it will be extremely dangerous. It could lead to a period of unprecedented woes in our society. I invite the Opposition to join us in this endeavour of stabilising the country’s economy. After accomplishing this, we can decide on holding the Presidential and General Elections.” 

Meanwhile, the IMF informed that since "Sri Lanka has now received financing related assurances from all major bilateral creditors, this paves the way for consideration by the IMF Board on 20 March the approval of the Staff Level Agreement reached on 1 September 2022, for financing under an Extended Fund Facility (EFF)". The IMF also observed that approval by the Board would also catalyse financing from other creditors, including the World Bank and the Asian Development Bank while the arrangement will support the authorities’ programme of ambitious reforms that they have already embarked upon, which will in turn help Sri Lanka emerge from its current crisis and set it on a trajectory of strong and inclusive growth.

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