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IMF talks only after Budget passed

01 Nov 2020

  • Budget 2021 required for discussions
  • If they give, we will take: Treasury Secretary
Discussions pertaining to Sri Lanka’s request from the International Monetary Fund (IMF) for a Rapid Financing Instrument (RFI) are at a standstill until Budget 2021 is passed in Parliament, according to the Treasury Secretary.  Treasury Secretary S.R. Attygalle told The Sunday Morning Business that any credit line discussion has to be based on documentation and in this case, it is the Budget 2021 upon which discussions on the RFI has to be built.  “They have to have something concrete such as policy documents to decide,” Attygalle added.  The Budget 2021 is set to be presented to the Parliament on 17 November this year. In early October, the Cabinet of Ministers approved the Appropriation Bill in which the current expenditure has been outlined as Rs. 2.69 trillion while the capital expenditure has been outlined as Rs. 2.21 billion.  When asked how urgent the RFI facility is given that a significant number of economically important cities are either isolated or under curfew due to the second local outbreak of Covid-19, Attygalle responded, stating: “We will go for the financing facility if they are willing to give us.” Sri Lanka submitted the request to the IMF for emergency financial support under the RFI in April this year. In mid-April, IMF Acting Mission Chief for Sri Lanka Masahiro Nozaki confirmed to The Sunday Morning Business that this request was being reviewed. Nozaki added that the RFI, if approved, could potentially replace the existing $ 1.5 billion Extended Fund Facility (EFF) arrangement of Sri Lanka with the IMF, from which Sri Lanka has so far received $ 1.3 billion.  Nevertheless, Sri Lanka had not seen implementing key requirements laid by the IMF in the recent years. For example, approval of the new Central Bank law in line with international practices and increasing the tax revenue of the country are two of the many requirements of the IMF. In August, we exclusively reported that the proposed Central Bank Act has been abandoned by the Government. Further, the tax revenue target also had to be shrunken due to significant tax concessions announced by the Government, last November.  In August this year, Central Bank of Sri Lanka (CBSL) Governor Prof. W.D. Lakshman told The Sunday Morning Business that Sri Lanka will obtain emergency financial support under the RFI of the IMF only if the support would be provided with no conditionality.  “We do not want to go for the conditionality of the IMF. We were told this arrangement is without any conditions. If that is the case, when the opportunity comes, we will renegotiate it. It has to be negotiated on our conditions,” the CBSL Governor said.  State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal too made similar statements in a number of recent media conferences. Meanwhile, Janatha Vimukthi Peramuna (JVP) General Secretary Tilvin Silva in a recent press conference stated that Sri Lanka has requested a loan of $ 1 billion from India and it has offered to provide a guarantee of $ 1 billion through the IMF. Nevertheless, the Sri Lankan Government reached out to China for a $ 500 million credit line, which is expected to be signed shortly. The statements of Cabraal and Prof. Lakshman and the Government’s move to obtain another loan from China faced backlash on social media including from former Minister of Finance Mangala Samaraweera. “IMF straitjacket vs. Chinese debt trap? If Sri Lanka is to avert an unprecedented economic breakdown, the Government must start negotiating with the IMF immediately. Imposing strict fiscal and monetary discipline is the need of the hour,” Samaraweera tweeted on 14 October. According to Verité Research, an independent think tank in Colombo, loans from China have high interest rates and very short maturity periods as opposed to credit facilities from the IMF.      


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