Rapid Financing request still not approved
By The Sunday Morning Business Desk Sri Lanka’s economic challenges and mountain of public debt are significantly delaying the review of the country’s request from the International Monetary Fund (IMF) for emergency financing that was made over seven months ago, according to the IMF. “Assessing the relevant conditions for the Rapid Financing Instrument (RFI) has taken longer than for other countries, due to Sri Lanka’s daunting economic challenges, high public debt, and Parliamentary elections in August. The RFI request remains in place,” Acting IMF Mission Chief for Sri Lanka Masahiro Nozaki told us last Wednesday (25), responding to a query. In early-April, Sri Lanka requested for emergency financial support under the RFI of the IMF. In mid-April, Nozaki confirmed to The Sunday Morning Business that this request was being reviewed.
Speaking further last week, Nozaki added that the IMF has sought but not reached an understanding yet on how to fulfil the key requirements for the RFI, which include policies to continue ensuring debt sustainability. He added that the Sri Lankan authorities have a range of options to ensure debt sustainability and the IMF stands ready to discuss all options with the authorities.
Meanwhile, State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal, in an interview with The Sunday Morning two weeks ago, stated that the country’s debt management strategy is “wide” and “far reaching” and added that the present Government is aware of the exact steps that need to be taken to steer the Sri Lankan economy back to health.
“We have formed a view that any IMF funding support will not be necessary for Sri Lanka at this stage and that is why we have not sought assistance from that institution. I could further elaborate that as a shareholder of the IMF, we can of course at any time reach out to them if we need any specialised technical support or advice, and we may still do that if we believe we can benefit from some specific advice or expertise,” Cabraal noted.
Speaking further, Cabraal stated that IMF loans are often viewed as the only way forward to “discipline” a country and are also viewed as programmes that provide “credibility” to a country’s own plans, while more countries have suffered from even greater structural weaknesses after IMF programmes.
“This is also a factor that needs to be taken cognisance of by country authorities. After all, it is a country’s Government that will be responsible to its stakeholders for success or failure in the final analysis, and not the IMF or the World Bank,” Cabraal added.
Following the global outbreak of the pandemic in the first quarter of this year, the IMF received about 102 requests from countries, seeking RFI support. As of mid-September, about 76 out of these 102 requests had been approved, according to the IMF. This means that Sri Lanka was among approximately 20 or 30 countries that were not granted RFI support.
The 76 approved countries include a number of Asia Pacific countries such as Bangladesh, Mongolia, Myanmar, and Nepal. On 29 May, Bangladesh was approved $ 488 million under the RFI while on 26 June, Myanmar was approved $ 237.7 million. On 3 June, Mongolia was approved $ 99 million under the RFI. The total of the approved funds under this facility was $ 31 billion by end-September.
When we contacted Treasury and Ministry of Finance Secretary S.R. Attygalle last month to know the reasons for the delay, he said that the IMF was waiting till the 2021 Budget was presented to Parliament, and it was presented in Parliament on 17 November. Our attempts to contact Attygalle last week for an update of his comment proved futile.
However, when asked earlier how urgently Sri Lanka requires RFI support and if Sri Lanka could afford to be excluded from this financing, he said that it was not desperately needed by the country.
Meanwhile, in mid-August, 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 only if the support would be provided with no conditionality.