Former CB Governor confident of IMF review completion by February

• Dr. Coomaraswamy notes following staff-level approval, obtaining IMF Executive Board approval could take further 8-10 weeks
• Says it is to government’s credit that they have continued this process without any interruption
• Says “very encouraging” new government has retained Central Bank Governor

By Nishel Fernando

Senior Economist and former Central Bank Governor Dr. Indrajit Coomaraswamy expressed optimism about the completion of the third review of the International Monetary Fund (IMF) bailout package by mid-February next year, as stipulated by President Anura Kumara Dissanayake.

An IMF mission is currently in Sri Lanka, conducting the third review of the IMF bailout package. An update on the review is expected to be announced on Saturday, at the conclusion of their mission.

“I’m pretty optimistic that we should be able to get this programme review completed. What it does, of course, is immediately trigger additional funds from the ADB, World Bank and other sources of private financing, which will likely be forthcoming in greater quantities,” Dr. Coomaraswamy said at a seminar organised by London-based think tank Overseas Development Institute Global, this week.

After securing the staff-level approval, he noted that it could take further eight to 10 weeks to obtain the IMF Executive Board approval.

“The best possible scenario is to get a staff-level agreement by the end of the mission, which usually takes about two weeks. From the staff-level agreement to the board meeting, it can take eight to 10 weeks, possibly even longer, considering the Christmas break in the middle of this period,” he explained.

Sri Lanka is set to unlock around US $ 330 million under the fourth tranche of the US $ 3 billion bailout package.

According to Dr. Coomaraswamy, the government is likely in discussion with the IMF delegation on the possibility of providing relief to the lower and middle-income groups.

“To do that, the president aims to revise the current tax structure to shift more of the burden on to the higher-income groups. He also wants to remove the Value Added Tax on certain essential goods, to provide relief to those in need and beef up the social safety net. The IMF, of course, is dealing with a government with a very strong mandate and I think they have signalled a willingness to see how they can accommodate these measures within the overall framework. However, there will need to be offsetting measures and that’s what I believe is being negotiated now,” he elaborated.

Dr. Coomaraswamy was also optimistic about completing debt restructuring within this year.

He acknowledged that the delay in the third review was inevitable, due to the pending Parliamentary Election.

“There was some talk of the review being delayed. There has been a little delay but it was inevitable because an established government was needed. On the day the Cabinet was appointed, the IMF review commenced,” he said.

Dr. Coomaraswamy credited the new government for continuing on the path of economic stability, without significant disruption.

“It is to the government’s credit that they have continued this process without any interruption. Secondly, I think it is very encouraging that they retained the Governor of the Central Bank,” he remarked.