Discussions positive; new loan expected before the end of 2013
Government is exploring the possibility of obtaining a whopping USD 1.5 billion loan facility from the International Monetary Fund (IMF), highly placed government sources told ‘The Nation’.“If the ongoing discussions bear fruit, Sri Lanka will receive the approval for the fresh $ 1.5 billion loan facility before the end of this year,” a senior official of the Central Bank said yesterday. The fresh loan, he said, will be provided to Sri Lanka by the IMF through the Central Bank.
The government is seeking the fresh loan facility after obtaining a whopping $ 2.5 billion loan facility from the IMF seven months ago. Although the final tranche of the IMF loan facility provided to Sri Lanka was released in July, last year, the bailout plan was approved in 2009. It is also learnt that a top level IMF delegation is now in the process of reviewing the country’s economic performance prior to the final decision on the fresh loan facility. The IMF, the Central Bank official said, will look into the stability of the rupee and the balance of payment.
“However, he IMF officials are of the view that the country’s economy is moving towards the right direction following the release of the final tranche of the IMF bailout plan,” the official added.The 2009 IMF bailout was approved when Sri Lanka’s foreign reserves crashed to a low level of $1 billion, but Central Bank of Sri Lanka figures showed reserves of $8.6 billion by September last year.
“The adjustment measures implemented by the authorities have placed the economy on a more sustainable trajectory,” Min Zhu, the IMF’s Deputy Managing Director said on the release of the previous IMF loan. “However, it will take time for the new monetary and exchange rate regime to become fully established, and the authorities will need to stand ready to adjust policies further to stabilise external reserves, especially if the global environment becomes less favourable.” He further said cautioning the Sri Lankan government at that point.
However, following the release of the final tranche, the government revised down its growth forecast for 2012 from 7.2 percent to 6.5 percent after a drastic slow-down in imports due to sharp increases in import tariffs vis-a-vis a $10-billion trade deficit. The new loan, a senior Treasury official who wished to remain anonymous said, will primarily be utilized for government spending.