Govt. could extend IMF program

• CB Chief says Govt. has option to extend EFF by one year, enhance funding limit 
• CB holds three meetings with IMF to get program on track 
• Finance Minister likely to meet IMF soon, both sides to negotiate way forward  

The Government has the option of extending the International Monetary Fund (IMF) program by a year, Central Bank Governor Dr. Indrajit Coomaraswamy said yesterday, describing it as a positive option for Sri Lanka as it looks to fund nearly $3 billion in debt repayments this year. 

The Governor also said the Government had already expressed interest in resuming the IMF program and the Central Bank has already begun discussions towards this end. He also noted that the $ 1.5 billion Extended Fund Facility (EFF) program, which is expected to conclude in June this year, could be enhanced if the Government wishes to do so. However, the first step would be to review the current state of the program before making any decision. He also contended that the fuel formula had not been completely disregarded in deciding fuel prices.   .

“I’m not aware the fuel formula is in the dustbin,” he said in response to questions. “It may be adjusted, but the basic principle is to have cost pricing, and there are various ways of doing that.  We have already had three conversations with the IMF and the Minister will also engage with them soon. The program will be reviewed, but I suspect the broad parameters will be the same but there may be some leeway to negotiate. There is also provision for the EFF to be extended by a year, so that is something the Government could negotiate if it wants to.” 

Not only could the program be extended, but the funding can be enhanced as well, the official said. The Government could make a decision to request, then on the basis of the request, negotiate and agree to what conditions and goals both agree on. “Both sides will have to negotiate but I think there is a commitment from both sides to continue the program.”

The Governor declined to comment on how much more funding the program could provide for Sri Lanka, but acknowledged that an extended program could support the monetary authority to raise funds from capital markets at a lower interest rate.  

“We have to see how much more money we would get, and what are the terms and conditions applied to it. All these things will have to be considered during the negotiations. The Government would have to revisit what was agreed to on 26 October and decide what it can and cannot do, or what could be done additionally and then take a position, and go negotiate.” 

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