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Prez wants IMF deal to be stepping-stone to reducing debt

02 Sep 2022

  • Says agreement stands for commitment to carry out needed reforms
  • Highlights addressing external imbalances and restarting export-oriented growth  
  • PM Dinesh notes need to make major sacrifices to find solutions
Following the announcement made by the International Monetary Fund (IMF) that it has reached a staff-level agreement with the Sri Lankan authorities to provide an extended fund facility (EFF) of $ 2.9 billion to Sri Lanka within a period of 48 months, President Ranil Wickremesinghe said that this should be a start for Sri Lanka to reduce its debts and if possible, even eliminate its debts. The President, who is also the Minister of Finance, Economic Stabilisation, and National Policies, said in a statement yesterday (1): “This agreement is a testimony of our commitment to carry out the necessary reforms in order to offer a better life to our fellow citizens. It paves the way for the provision of financial support from the IMF and other development partners that should help us address current external imbalances and restart our growth engine. I am grateful to the IMF team, the Finance Ministry, and the Central Bank of Sri Lanka for the hard work and dedication shown in order to come to that agreement in record time.” The statement further read that reaching a staff-level agreement with the IMF was one of the immediate objectives of the Government and a directive by the President since he was elected in July. It stated that the authorities will now work on implementing the prior actions on securing the financing assurances needed from bilateral creditors in order to obtain the adoption of the programme by the IMF’s Executive Board. Furthermore, in another statement issued through the President’s Media Division (PMD), Wickremesinghe noted that he considers the IMF agreement to be the beginning of a new economic era where the country is committed to a very competitive export-oriented industry, while maintaining and improving social standards as well as looking after vulnerable groups. He further said that it should be the beginning for Sri Lanka to reduce its debts and if possible, even eliminate its debts. “Not only rising from the bankruptcy crisis and the debt moratorium, but it is also key to ensure that our social sectors are protected and both the economic and social aspects of our lifestyle will certainly not have any further setbacks. The beginning will be difficult, but we know as we go on that we can make more progress. Our commitment is what matters now and we should not only fulfil the targets here, but we must get ahead of them,” the President said, adding: “I appeal to the country, let us reorient ourselves to an export-oriented economy which will also make it easier for us to sustain our social services.” The IMF mission also met President Wickremesinghe at the Presidential Secretariat last morning, where the IMF officials had officially informed the President that a staff-level agreement has been reached.  During the meeting with the IMF officials, the President had, on a personal note, told them: “When I was born, Sri Lanka had no debt and we had sufficient reserves to lend to the UK, which was recovering from war times. We had made enough out of our rubber and tea, and we built our first reservoir out of our own initiative. Now, that was the Government of Prime Minister D.S. Senanayake. And he believed in one principle – that a nation and a person should be debt free. He was the chairman of the lay-organisation of the Buddhist sects in this country and like all others, was committed to following the doctrine that people should not get into debt and that there should not be insolvency.” Therefore, the President noted that if the country is to uphold Article 9 of the Constitution, it must follow that path.  “You can’t pay lip service only. And let this be the beginning and the way forward because, on the 75th anniversary of our Independence, this is the best commitment we can make for the next 25 years,” he added. Meanwhile, expressing his views regarding the IMF staff-level agreement in the Parliament yesterday, Prime Minister Dinesh Gunawardena said that this would provide space for Sri Lanka to obtain funds for reviving its economy and bringing normalcy to the country. Adding that reaching the agreement was a result of the Government’s consistent efforts, he said that everyone must keep in mind that this is only the beginning of a long journey. “In the future, we will have to make major sacrifices in order to find the solutions to the factors that led to this debacle. For several decades, we have consumed much more than our savings. Hence, our debts have increased in a massive proportion. Due to several factors, the income of the country has declined. As a result, we were unable to increase the investments in important sectors such as health, education, and public transport,” he said. “We have consumed a huge amount of fuel and electricity over the years. This has led to a huge trade deficit and weakened our foreign exchange parity. State-owned enterprises have not been managed properly and they have made huge losses. It has resulted in a large burden on the people.” To come out of the crisis, he said that the country will have to take deep and comprehensive economic reforms, adding that such should be implemented by whoever is in power. Noting that the current Government has prepared a reform programme during the past few months, Gunawardena said that such was agreed upon at the official meeting of the IMF. He said that the Government is aware that reforms are difficult to be implemented in the circumstances where the people are facing serious economic difficulties and that the most essential requirement is to understand why these reforms are necessary to save the country in the mid- and long-term. “President Wickremesinghe and our Government are absolutely committed to bringing back this bankrupt country to the path of progress and to ensure a bright future for our future generations. Furthermore, we will keep Parliament informed about the agreement reached with the IMF,” he added. The IMF mission, led by IMF’s Monetary and Capital Market Department’s Debt Capital Markets Division Chief Peter Breuer and IMF’s Fiscal Affairs Department Senior Economist Masahiro Nozaki, who arrived in Colombo on 24 August to continue discussions on the IMF’s support for Sri Lanka and the authorities’ comprehensive economic reform programme, stated yesterday that a staff-level agreement has been reached to support Sri Lanka’s economic policies with a 48-month arrangement under an EFF of $ 2.9 billion.


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