IMF reaches agreement with Sri Lanka for $337 mn bailout

Colombo/Washington: The IMF on Thursday said it has reached a staff-level agreement with Sri Lanka for the next phase that would enable it access to USD 337 million from the nearly USD 3 billion bailout approved in 2023 for the cash-strapped country.

The International Monetary Fund (IMF) also praised Colombo as it said macroeconomic policy reforms are starting to bear fruit.

Starting March 7, the IMF team comprising Senior Mission Chief Peter Breuer and Deputy Mission Chief Katsiaryna Svirydzenka were conducting, in Colombo, a two-week-long second review of the March 2023 bailout of USD 2.9 billion spanning over four years.

Two tranches of USD 330 million each were released in March and December 2023.

“The IMF team reached staff-level agreement with the Sri Lankan authorities on the second review under the economic reform programme supported by a 4-year Extended Fund Facility (EFF) arrangement and concluded the 2024 Article IV Consultation discussions,” a statement from the global lender said in Washington.

The EFF arrangement was approved by the IMF Executive Board for a total amount of SDR 2.3 billion (about USD 3 billion) on March 20, 2023.

“Upon completion of the Executive Board review, Sri Lanka would have access to SDR 254 million (about USD 337 million), bringing the total IMF financial support disbursed under the arrangement to SDR 762 million (about USD 1 billion), the IMF statement said.

Once the review is approved by IMF Management and completed by the IMF Executive Board, Sri Lanka will have access to SDR 254 million (about USD 337 million) in financing.

In April 2022, Sri Lanka declared its first-ever sovereign default since gaining independence from Britain in 1948.

The unprecedented financial crisis led President Ranil Wickremesinghe’s predecessor Gotabaya Rajapaksa to quit office in 2022. Wickremesinghe stepped in to fill in Rajapaksa’s remaining term till 2024.

The IMF statement also mentioned the condition for completion of the review by the IMF’s Executive Board, which it said, required the implementation by the authorities of prior actions; and the completion of financing assurances review, confirming multilateral partners’ financing contributions and assessing adequate progress with debt restructuring.

“Macroeconomic policy reforms are starting to bear fruit. Sustaining the reform momentum and addressing governance weaknesses and corruption vulnerabilities are critical to put the economy on a path towards lasting recovery and stable and inclusive growth,” the statement said.