IMF program can be unlocked next month with all creditor assurances

by Zulfick Farzan 25-1-2023 | 10:25 AM

COLOMBO (News 1st) - Sri Lanka's Central Bank Governor Dr. Nandala Weerasinghe on Monday (23) said that when Sri Lanka obtains all assurances from its bilateral creditors, it would be able to unlock the IMF program somewhere in February.

Speaking to the Committee on Public Finance in Parliament, the Governor said that it was not wise for him as the governor to make comments on the assurances from the creditors, as Sri Lanka is a third party to the process.

"Creditors are supposed to give their assurances to the fund (IMF), so we are a third party as a debtor. I think it is not appropriate for us to make a comment, unless those two parties make the announcement publicly on what they are communicating," said the Governor.

The Committee on Public Finance (CoPF) chaired by Dr.Harsha De Silva, Member of Parliament recently (23) stressed that the aim of the committee regardless of allegiances will be to stand by the reforms promulgated by the IMF and being executed by the Central Bank (CB).  

This comes in the wake of a Central Bank confirmation that they are confident of having an actual IMF first tranche disbursement within the 1st Quarter of 2023.

CoPF queried the severe social implications of such steep mechanisms to adhere to IMF conditions.

The Central Bank responded by confirming that the IMF are wary about the social impact to vulnerable communities and has invoked certain safeguards such as expenditure ceilings to negate those effects. 

When queried as to the adverse effects of market contraction due to the stifling interest rates, CB acknowledged that those measures have been taken to limit growth in order to prevent the need for greater foreign exchange given the dwindling amount currently in the country. 

They went on to reiterate that with a cash infusion via the Extended Fund Facility (EFF) from IMF, interest rates can once again be relaxed, and the market will once again have an opportunity to expand. 

When the question of alternatives to an IMF bailout were reached, the Central Bank stressed that no other international financing/funding institute is willing to partner with Sri Lanka on its debt management unless they see an IMF partnership materialize first. 

With the ostensible debt treatment measures that an IMF program accompanies, it reassures international agencies of Sri Lanka’s credibility to once more partner with the country for future ventures including debt management. This is why the CB stresses that it is imperative for Sri Lanka to lock in the bailout.