IMF to lend 1.5 billion dollars to Sri Lanka

Sri Lanka has reached a three year deal to borrow 1.5 billion U.S. dollars from the International Monetary Fund, in support of the government's economic reform agenda, the IMF said in a statement here on Friday.

Todd Schneider, IMF mission chief for Sri Lanka, announced that following discussions held between IMF staff and the Sri Lankan authorities during the 2016 Spring Meetings in Washington, a staff-level agreement was reached on a three-year program to be supported by the IMF's Extended Fund Facility (EFF).

The agreement will be subject to completion of prior actions and approval by the IMF's Executive Board, which is expected to consider Sri Lanka's request in early June.

"Formal approval of the EFF is expected to catalyze an additional 650 million dollars in other multilateral and bilateral loans, bringing total support to about 2.2 billion dollars(over and above existing financing arrangements)," the IMF statement said.

An EFF is designed to provide assistance to countries who are experiencing serious payments imbalances because of structural impediments or characterized by slow growth and an inherently weak balance of payments position.

Sri Lanka's new government made an official request for a fresh bail out package from the IMF earlier this year to help tackle a widening balance of payment deficit.

However the fund turned down the request initially, saying the country's reserves were at a comfortable level then.

The IMF lent 2.6 billion dollars to Sri Lanka in 2009 to help it recover from the impact of the global financial crisis and return the country to long-term, sustainable growth after almost three decades of war.

The end of the conflict provides Sri Lanka with a unique opportunity to undertake economic reform and reconstruction, which would be key to laying the basis for high economic growth in the years ahead, the IMF had said. Endit