Home / Front Page/ Govt. asks IMF for 1-year loan extension, relax tight spending targets

Govt. asks IMF for 1-year loan extension, relax tight spending targets

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 27 February 2019 02:40


Reuters: Sri Lanka has asked the International Monetary Fund (IMF) to extend a $1.5 billion loan by another year and relax its tight spending targets ahead of key elections, two Government sources close to the negotiations told Reuters on Tuesday. 

The loan is crucial for Sri Lanka, which plans to sell up to $3 billion of bonds as early as next week and needs the IMF program to continue to ensure more attractive borrowing terms. 

The global lender delayed discussions on the sixth tranche of a three-year loan in November after a political crisis that has led to a slump in economic growth on the island. 

At the time, the IMF said it had suspended the program until it had more clarity on the political situation, after President Maithripala Sirisena abruptly sacked his Prime Minister in a move that was later ruled unconstitutional. 

The Government has requested the IMF push back its deficit target of 3.5% of gross domestic product (GDP) agreed under the loan program to 2021 from 2020, a senior Government official familiar with the discussions told Reuters. 

“The discussions were focused on budget deficit and expenditure numbers,” the source said. “We will not deviate from the fiscal consolidation path. But expenditure cannot be drastically curtailed this year, given it is an election year. We hope there could be a compromise.” 

A second official said Colombo had told the lender that an IMF-backed revenue act, which was a condition for granting the loan, also needs amendments. 

Officials from the IMF were not immediately available for comment. The talks will end on Thursday. 

The IMF has disbursed over $1 billion of the $1.5 billion loan agreed in 2016. It was designed to avert a financial crisis and support the economic reform agenda of President Maithripala Sirisena’s coalition government. 

Sri Lanka is due to hold a Presidential Election this year and parliamentary polls in 2020. 

Junior Finance Minister Eran Wickramaratne told Reuters that the Government will move ahead with a plan to sell sovereign bonds after the IMF discussions conclude. 

Sri Lanka is struggling to repay its foreign loans, with a record $5.9 billion due this year, including $2.6 billion in the first three months. It used its reserves to repay a $1 billion sovereign bond loan in January. 

The South Asian island nation failed to finalise financing it had planned in the first quarter, including a $300 million loan from Bank of China and a $400 million swap from Reserve Bank of India. 

Sirisena’s abrupt change of Prime Minister and decision to dissolve Parliament created panic and uncertainty among investors, who dumped Sri Lankan Government bonds and other assets, sending the rupee currency to record lows. 

The move was later ruled unconstitutional and Ranil Wickremesinghe was reinstated as Prime Minister after 51 days.

Share This Article

Facebook Twitter


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

Let sanity prevail

Saturday, 18 May 2019

To those of our generation it will appear that Sri Lanka is in a near permanent state of conflict; now hidden, now open, citizen against citizen, brother against brother. There are interruptions to the theme of violence, these breaks are mistaken for

The crisis and constitutional violations

Friday, 17 May 2019

Sri Lanka was in a deep and complex crisis even before the outbreak of the Easter Sunday attacks. Now, in the wake of the Easter Sunday attacks, the country has plunged into a deeper and bigger crisis, which is more complex than it was before. The ec

Who are we?

Friday, 17 May 2019

Faced with a tragedy of the scale we have just witnessed, I don’t believe it’s enough to ask how it happened, or what happens next. We must ask a much more fundamental question, which is, who are we? The easy answer is to say we are Sri Lankans,

Mangala’s mistake

Friday, 17 May 2019

The script of ‘Mangala’s mistake’ is simple and straightforward. It begins with a pervasive silence of our collective complicity with an untruth. Mangala decides to pierce the conspiracy of silence with the obvious truth. It is a grave mistake

Columnists More