CB expects completion of IMF review by Oct-Nov. despite signs of delay

 Dr. Nandalal Weerasinghe
Pic by Pradeep Pathirana

• Sri Lanka was unable to finalise a staff agreement on the first review with the IMF staff mission that concluded its visit to the country last week
• Completion of the fist review will enable the disbursement of the US$ 330mn second tranche of the US$ 2.9 billion EFF
• CB chief says talks with foreign creditors  “progressing well” and “good support” is seen from India, Paris Club and China
• Expressed confidence in entering a staff level agreement with the IMF “as soon as possible”

By Indika Sakalasooriya

The Central Bank yesterday said it will stick to the timelines already announced for the completion of the first review of the International Monetary Fund (IMF) programme, 

despite indications of potential delays.

The completion of the fist review will enable the disbursement of the second tranche of the US$ 2.9 billion Extended Fund Facility (EFF), which will amount to about US$ 330 million.

Sri Lanka was unable to finalise a staff agreement on the first review with the IMF staff mission that concluded its visit to the country last week. This was due to the country falling short of meeting the government revenue targets and not yet securing a debt treatment deal with its foreign creditors.

The Central Bank in August said it expected the first IMF review to be completed by October-November based on the strong belief that a deal could be struck with the country’s foreign creditors by that time. 

Speaking at a post-monetary policy review press conference yesterday in Colombo after reducing policy interest rates by further 100 basis points, the Central Bank Governor Dr. Nandalal Weerasinghe said the talks with Sri Lanka’s foreign creditors are “progressing well” and “good support” is seen from India, Paris Club and China.
He affirmed that a staff level agreement with the IMF will be entered “as soon as possible” once a few remaining matters are resolved.

While Paris Club nations and India have already offered broad support for Sri Lanka’s debt restructuring, China’s stance on the matter remains uncertain or unclear.

China remains Sri Lanka’s biggest external creditor, while Sri Lanka owes money to Paris Club nations and India. In addition, Sri Lanka owes money to private creditors who have invested in the country’s sovereign bonds. President Ranil Wickremesinghe is expected to travel to China on an official visit this month and highly placed sources said debt restructuring will be a top priority on his agenda during the trip.

IMF Senior Mission Chief for Sri Lanka, Peter Breuer last week said as Sri Lanka is yet to meet two key targets under the IMF programme there is no “fixed timeline” for the disbursement of the second tranche of the US$ 2.9 billion EFF.