SL to get $ 780 m from IMF?
- Disbursement in August if approved by IMF Board
- SL to be beneficiary with 0.12% quota shares of $ 650 b
- No recent lending request made by GoSL: IMF
- SL’s request for emergency financial support in 2020 stalled
BY YOSHITHA PERERA
Sri Lanka stands to receive an allocation of $ 780 million by the end of August, through the International Monetary Fund’s (IMF) new Special Drawing Rights (SDR) proposal, pending approval from the IMF Board of Governors.
The SDR facility, if approved, will be received by Sri Lanka after a request made to the Fund for emergency financial assistance in 2020 did not materialise due to shortcomings in finalising the agreements.
Under the proposal, due to be reviewed in early August, Sri Lanka is entitled to 0.12% of the disbursement fund which amounts to over Rs. 155.5 billion.
The SDR is the IMF’s international reserve asset which is utilised to supplement the official reserves of member countries.
Speaking to The Sunday Morning, IMF Mission Chief for Sri Lanka Masahiro Nozaki said that as announced in IMF Managing Director Kristalina Georgieva’s statement on 9 July, the new SDR allocation will be presented to the IMF’s Board of Governors for their consideration and approval.
He noted: “The SDR allocation is a unique instrument that would benefit all IMF member countries including Sri Lanka. Once approved, the new SDR allocation will be distributed, unconditionally, to all members that participate in the SDR Department according to their quota shares. Sri Lanka’s quota share is 0.12% ($ 780 million or Rs. 155.5 billion).”
According to the IMF website, SDR is an asset, though not money in the traditional sense because it cannot be used to buy goods. The value of an SDR is based on a basket of the world’s five leading currencies – the US Dollar, the Euro, the Chinese Yuan, the Japanese Yen, and the British Pound.
Explaining further, Nozaki said that the SDR is an international reserve asset created by the IMF in 1969 and a general SDR allocation is a way of supplementing IMF member countries’ foreign exchange reserves, thereby allowing members to build such reserves.
“The Executive Board supported a proposal for a new SDR allocation totalling $ 650 billion based on the IMF staff’s assessment of long-term global reserve needs.”
Further explaining that IMF lending differs from the general SDR allocation, Nozaki noted that the IMF has not received a request for IMF lending from Sri Lanka recently, but stands ready to discuss options if requested.
“There was an earlier request from Sri Lanka for emergency financial support under the Rapid Financing Instrument (RFI), made in April 2020, but it did not move forward. Staff sought but did not reach an understanding on how to fulfil key requirements for the RFI, which include policies to continue ensuring debt sustainability.”
Nozaki added that through IMF lending, for example, under the Stand-By Arrangement (SBA) or the Extended Fund Facility (EFF), the IMF assists countries hit by economic shocks, by providing them with the financial support to create breathing room, as they implement adjustment policies to restore economic stability and growth.
He further added that the RFI which provides rapid assistance to countries with urgent balance of payments needs, is yet another example of IMF lending.