President announces decision to work with IMF

17 March 2022 04:04 am Views - 176

• Says decided to work with IMF after examining advantages and disadvantages 
• Confirms that SL has initiated talks with international financial institutions and friendly nations about country’s debt repayments
• Presents some projections for exports, imports, remittances and tourism after free float of currency
• Identifies ongoing forex crisis as root cause for present economic crisis

Addressing the nation, President Gotabaya Rajapaksa yesterday announced his decision to work with the International Monetary Fund (IMF) to explore a sustainable solution for the country to repay its foreign debt and build back its foreign reserves. 

Rajapaksa met with a visiting IMF Asia-Pacific team on Tuesday (15). The team consisted of IMF Asia Pacific Director Changyong Rhee, Deputy Director Anne-Marie Gulde-Wolf and Sri Lanka resident representative Tubagus Feridhanusetyawan, the President’s Office said.

“The government is in discussions with various parties to implement a new method regarding this, which will be beneficial to our country. Yesterday’s (15th) discussion with the IMF 

was also held for this purpose,” he said. “Through those discussions, we hope to find a way to pay off our annual loan instalments, sovereign bonds and so on. Subsequent to my discussions with the IMF, I have decided to work with them after examining the advantages and disadvantages,” he said.

While hinting at debt restructuring, he also said his government has initiated talks with international financial institutions and friendly nations about the country’s debt repayments.  

 However, the country’s Central Bank under Ajith Nivard Cabraal has repeatedly resisted the need for an IMF rescue package and a Fund-backed debt restructuring exercise, believing that the home-grown fix they have devised to resolve the debt problem will yield results.

Meanwhile, presenting some projections for exports, imports, remittances and tourism after the free float of the currency, Rajapaksa stressed that the root cause of the current economic situation in the country is the foreign exchange crisis. 

“…once the rupee is floated, export earnings are expected to reach US $ 13 billion. This will also reduce the cost of imports from US $ 22 billion to US $ 20 billion. If that happens, the trade deficit could be reduced to US $ 7 billion. We should aim for this target.

We can also expect US $ 4 billion by providing export services and US $ 5 billion in remittances from expatriate workers. Accordingly, our trade deficit will be US $ 2.4 billion. We must take action to fill this deficit and increase our foreign exchange reserves,” he said. 

Rajapaksa also stressed that due to some of the decisions he had taken in the recent past, such as the suspension of vehicle imports, the country was able to reduce import expenditure and thereby prevent forex outflows.  

While pointing out that about 20 percent of Sri Lanka’s import expenditure is on oil imports, he emphasised the need of harnessing renewable energy sources for power generation.