Business

IMF ready to discuss loan on request

  • To visit Colombo from 7-20 Dec.
  • Says so far no request received from SL seeking support
  • Cabraal prefers other alternatives instead of IMF

By Madhusha Thavapalakumar

As the debate between government ministers on whether to seek financial assistance from the International Monetary Fund (IMF) deepens, the IMF told The Morning Business that its staff stands ready to discuss options with the Sri Lankan Government, during the upcoming visit of the Fund’s representatives to Sri Lanka.

The IMF, Wednesday (24) night, disclosed this in response to media inquiry regarding an upcoming Article IV mission to Colombo, next month. 

“A staff team from the IMF is scheduled to visit Colombo during the period from 7 to 20 December to conduct the 2021 Article IV consultation with Sri Lanka. The IMF has not received a request for financial support from Sri Lanka recently, but the staff stands ready to discuss options if requested,” noted  IMF Mission Chief for Sri Lanka Masahiro Nozaki.

Under Article IV of the IMF’s Articles of Agreement, the IMF holds regular bilateral discussions with all member countries to review economic developments and policies; following approval by the IMF management, the IMF’s Executive Board discusses a Staff Report based on these discussions.

However, during the Monetary Policy Review press conference, held last morning (25), Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal stated that Sri Lanka is neither afraid nor has hindrances to approach IMF for financial assistance, but it simply chooses not to, merely because it does not feel the need for it.

“We have sought IMF assistance in 2009 and 2010. We, certainly, do not have any issues in going to the IMF if really required to do so. The reason why we have chosen not to seek their assistance is that our international sovereign bonds (ISBs) shot up to $ 15 billion by mid-2019 from a mere $ 5 billion in 2014. However, the gross domestic product (GDP) did not proportionately increase. As a result, we have begun looking for alternative financing options and that is what the IMF wants too. That is what they call ‘debt restructuring’,” Cabraal added.

He further noted that if they are to seek IMF assistance, the Fund might require the Government to depreciate the Sri Lankan rupee, increase interest rates, cut down the number of public servants, slash pension schemes, and sell state properties, which is a reform agenda the Government is not willing to comply with at the moment.

Referring to the statement made by Co-Cabinet Spokesman and Minister of Mass Media Dullas Alahapperuma during the Cabinet press briefing on Wednesday, where he admitted that the Government is divided on seeking such assistance both within the Cabinet of Ministers and the parliamentary group in deciding whether to seek IMF assistance or not, Cabraal stated that anyone can express their opinions during any forum, but ultimately, the final decision has to be taken by the Government.

It is learnt that while Minister of Energy Udaya Gammanpila proposed that the Government seek IMF support, Minister of Trade Dr. Bandula Gunawardana, Minister of Water Supply Vasudeva Nanayakkara, and Minister of Finance Basil Rajapaksa opposed seeking IMF assistance, claiming that the Government would not be able to persuade the people to accept the IMF’s conditions in return for financial support.

On Tuesday (23), United National Party (UNP) Leader and former Prime Minister Ranil Wickremesinghe claimed in Parliament that Sri Lanka will be engaging in Article IV discussions with the IMF in December, and called on the Government to disclose to Parliament the specifics of what will be discussed with the IMF.

Wickremesinghe further claimed that Parliament and the Monetary Board must be informed about what will be discussed and that Parliament has the right to know what is being discussed, as per the Constitution and the Articles of Agreement with the IMF.

IMF ready to discuss loan on request