IMF fund disbursement likely towards end of this year: CB Governor

• SL hopes to gain financial assurance from its external creditors in coming months
• Says everything depends on how external creditors extend support and how negotiation process progresses
• Assures domestic debt will not be touched as it will be detrimental to banking system

Central Bank Governor Dr. Nandalal Weerasinghe expressed confidence of disbursement of funds by the International Monetary Fund (IMF) towards the end of this year, since progress in this regard is taking place according to the timeline set. 
Dr. Weerasinghe told Bloomberg Television on Monday (22) that the island nation hopes to gain financial assurance from its external creditors in the coming months, soon after which the assistance from the IMF would come in. 

“We think, in the next three to four months, if all goes well, if all external creditors cooperate with the government of Sri Lanka, we will get the financial assurance by December. 
The IMF can then submit our paper to the Executive Board, so they can start disbursing the external fund facility towards the end of this year,” said Dr. Weerasinghe. 
He however cautioned that everything depends on the level of support extended by Sri Lanka’s external creditors and how the negotiation process would go on.  

Efforts are underway to approach all external creditors and kick off the negotiation process. Dr. Weerasinghe said Sri Lanka would be discussing in “good faith” for the country to obtain relief. 
“Hopefully all will be supporting us,” he said.  

Dr. Weersasinghe said in the coming few days, talks would be held to reach a staff-level agreement with the IMF on the overall macro and fiscal policy framework for the next three to four years, along with the medium-term framework.  An IMF staff team is expected in Colombo today to continue discussions with the Sri Lankan authorities for a staff-level agreement on a prospective IMF Extended Fund Facility (EFF) arrangement in the near term. The talks are expected to conclude on August 31.
The second phase of negotiation will be on the finalisation of the debt targets and making the medium to long-term debt sustainable. 

Meanwhile, Dr. Weerasinghe stressed that the domestic debt component would remain untouched during the debt restructuring process, as any intervention in that regard would be detrimental to the country’s economic recovery. He said the position the Central Bank announced on April 12 still remains and only external debt would be restructured as planned.  He pointed out that touching the domestic debt would have a significant negative impact on the banking system, which the economy cannot handle under the current circumstances. 

 “That will not help anyone, even external creditors in terms of recovery. We need to have a stable banking system. That is why our position on this still remains. This is a balance of payment crisis. We don’t see a problem with us meeting the domestic targets. We can manage the situation without touching domestic debt,” he said.