IMF strikes $2.9bn loan deal for Sri Lanka as economy slumps

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IMF strikes $2.9bn loan deal for Sri Lanka as economy slumpsCredit: KAZLOVA IRYNA/Shutterstock.com

The International Monetary Fund (IMF) has reached a staff-level agreement with Sri Lanka on an Extended Financing Facility Agreement, as reported on Thursday, September 1.

The deal was reached after an IMF mission to Colombo, Sri Lanka led by Mr. Peter Breuer and Mr. Masahiro Nozaki from August 24 to September 1, 2022.

At the end of the mission, MM. Breuer and Nozaki released the following statement:

“The Sri Lankan authorities and the IMF team have reached a staff-level agreement to support the authorities’ economic adjustment and reform policies with a new 48-month Extended Credit Facility (EFF) with access requested of about 2.2 billion SDR (equivalent to the US dollar. 2.9 billion dollars).

“The new EFF arrangement will support Sri Lanka’s agenda to restore macroeconomic stability and debt sustainability, while preserving financial stability, reducing vulnerabilities to corruption and unlocking Sri Lanka’s growth potential. ”

“The arrangement is subject to approval by IMF management and the Executive Board in the coming period, subject to the authorities implementing prior actions, obtaining assurances from funding from official creditors of Sri Lanka and good faith willingness to reach a collaborative agreement with private creditors.

“Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be needed to help ensure debt sustainability and close financing gaps.

“Sri Lanka is facing an acute crisis. Vulnerabilities have increased due to insufficient external reserves and unsustainable public debt dynamics.

“April’s debt moratorium caused Sri Lanka to default on its external obligations, and an extremely low level of foreign exchange reserves hampered the importation of essential goods, including fuel, further hampering economic activity. “.

“The economy is expected to contract by 8.7% in 2022 and inflation has recently topped 60%. The impact has been borne disproportionately by the poor and vulnerable.

“In this context, the authorities’ programme, supported by the Fund, would seek to stabilize the economy, protect the livelihoods of the Sri Lankan people and prepare the ground for economic recovery and the promotion of sustainable growth. and inclusive”.

“We would like to thank the authorities for their candid approach and warm hospitality and look forward to continuing our commitment to Sri Lanka and its people.”

The news follows reports of major riots in Sri Lanka showing the escalation of tensions in the country amid its current economic crisis.


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