The IMF is planning an in-person mission in the coming weeks to Sri Lanka, which is facing a very difficult economic condition, for discussions on a financial arrangement, its spokesman has said but emphasised that country needs to take steps to restore debt sustainability before the global lender can move on a financing programme.
International Monetary Fund Spokesperson Gerry Rice said the global financial body was committed to support Sri Lanka at this difficult time, in line with the IMF policies.
“Clearly Sri Lanka is facing a very difficult economic condition and severe balance of payments problems. We are deeply concerned about the impact of the ongoing crisis, particularly the humanitarian concern, that is the impact on people,” IMF Spokesperson Gerry Rice told a briefing on Thursday.
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His statement came a day after Sri Lankan Prime Minister Ranil Wickremesinghe said that he has urged IMF chief Kristalina Georgieva to "expedite" its assistance programme to the country.
Rice said the IMF is monitoring Sri Lanka’s situation closely and the IMF is planning an in-person mission to Colombo in the coming weeks to engage in policy discussions on the programme, building on the technical discussions that already took place in May.
Sri Lanka has decided to seek the assistance of the Washington-based global lender to combat the worst economic crisis since its independence from Britain in 1948. The talks between Sri Lanka and the IMF commenced on April 18.
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Sri Lanka has already initiated measures to restructure its foreign debts -- a prerequisite for an IMF programme -- after the government suspended all the external debt repayments on April 12.
Rice said the timing of a staff-level agreement will depend in part on the strength of the policies that the authorities would propose and would commit to.
The spokesman emphasised that since Sri Lanka’s debt was assessed as unsustainable, board approval for any programme would require adequate assurances that authorities would take measures to restore debt sustainability before a financial arrangement can be considered.
He emphasised that a staff-level agreement would go to the IMF board for approval to make the final decision.
The IMF Spokesman affirmed that Managing Director Georgieva spoke to the Sri Lankan Prime Minister Ranil Wickremesinghe on Tuesday and they discussed the IMF’s engagement with Sri Lanka in length.
“We are engaging as much as we can to see how we can help, but again too early for us to discuss the magnitude of a potential financing or a specific date for either the staff level agreement or when this might go to the board,” he said.
He reiterated that when the IMF determines that the country’s debt is not sustainable, the country needs to take steps to restore debt sustainability before the IMF can move forward with the financing programme.
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On Thursday last, Wickremesinghe had said the government was targeting $5 billion this year for repayments, plus a further $1 billion to bolster the country's reserves.
He said Sri Lanka’s bridging finance requirements would depend on an agreement with the IMF being reached.
Addressing Parliament on Tuesday, Wickremesinghe said Sri Lanka will need $5 billion to ensure that the people's daily lives are not disrupted for the next six months.
The nearly bankrupt country, with an acute foreign currency crisis that resulted in foreign debt default, announced in April that it is suspending nearly $7 billion foreign debt repayment due for this year out of about $25 billion due through 2026. Sri Lanka's total foreign debt stands at $51 billion.
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The IMF in May said that it requires sufficient assurance from the country that it will restore debt sustainability during the debt restructuring process.
The economic crisis has prompted an acute shortage of essential items like food, medicine, cooking gas and other fuel, toilet paper and even matches, with Sri Lankans for months being forced to wait in lines lasting hours outside stores to buy fuel and cooking gas.
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