Finance Minister to hold virtual meeting with IMF today

• SL likely to ask for its entire funding quota from IMF under long-term Extended Fund Facility running into 3 years 

Sri Lanka has requested a meeting with the International Monetary Fund (IMF) today (April 11) as a precursor to the Spring Meetings starting next week where a delegation led by new Finance Minister Ali Sabry would fly to Washington D.C. to begin in person talks for a rescue package with the multilateral lender. 

A virtual meeting had been originally scheduled between IMF Managing Director and the Finance Minister.
However, things didn’t go as planned with the Cabinet of Ministers including the Finance Minister who resigned en masse early last week in response to the rising public outrage at the government and the President Gotabaya Rajapaksa for mismanaging the country’s economy. 

“I requested the IMF to have that meeting as scheduled,” said Central Bank Governor, Dr. Nandalal Weerasinghe on Friday. 

The meeting will be attended by new Finance Minister Ali Sabry, Finance Ministry Secretary Mahinda Siriwarana and the Central Bank Governor.  

Thereafter a technical team comprising the Finance Minister and the Central Bank Governor would fly to Washington next week for IMF’s Spring Meetings set to begin on April 18 to begin technical level negotiations for programme support and debt restructuring. 

The Central Bank and the Finance Ministry during the weekend called for Requests for Proposals from eligible parties who can provide financial and legal advisory, and technical assistance during engagements with the IMF and other creditors for debt restructuring. 

The Central Bank expects to pursue both debt restructuring and programme support from the IMF together as the clock is fast ticking ahead of the next large sovereign debt repayment of a billion dollars in July this year. The ability of the country to settle the bond and other foreign debt obligations would solely depend on the level of success the authorities achieve during these talks with the IMF and other creditors. 

Upon coming into a preliminary understanding about programme support during technical evaluation with IMF, Sri Lanka will issue in what is called as a ‘Letter of Intent’ to the IMF stipulating the macro economic adjustments the domestic authorities are willing to undertake in order to put the economy back into working condition. 

Dr. Weerasinghe responding to a question as to the size of programme support expected from the IMF said that they might seek full access to funds under Sri Lanka’s quota under an Extended Fund Facility (EFF). 

EFF is a long-term engagement with the IMF running into three years with structural adjustments into the member economy. 

Under the current quota, Sri Lanka may be able to seek up to US$ 3.0 billion from the IMF, but the funds will not come at once as they are released in several tranches looking at the progress the recipient country makes with the agreed structural reforms to the economy.

However, if Sri Lanka’s quota is increased, Sri Lanka may be able to access a higher amount of funds. An IMF programme can also build confidence on Sri Lanka’s economy among international investors resulting in higher inflows.