Sri Lanka has reached only a preliminary agreement with the International Monetary Fund (IMF) prior to a staff-level agreement for an Extended Fund Facility (EFF) and Rapid Financing Instrument (RFI) states former Central Bank of Sri Lanka (CBSL) Deputy Governor Dr. W.A. Wijewardena


By Imesh Ranasinghe

Sri Lanka has only reached a preliminary agreement with the International Monetary Fund (IMF) prior to a staff-level agreement for an Extended Fund Facility (EFF) and Rapid Financing Instrument (RFI), stated former Central Bank of Sri Lanka (CBSL) Deputy Governor Dr. W.A. Wijewardena, clarifying a report by Reuters published yesterday (31 August).

“The IMF has neither confirmed nor denied the Reuters report. We don’t know whether it’s true or not. But preliminary means we need to have further consultations. This is not the final agreement,” he stated.

Reuters reported yesterday, quoting four sources, that Sri Lanka and the IMF have reached a preliminary agreement on an emergency loan, while a formal announcement in this regard will be made today (1).

Following the report, IMF Senior Mission Chief for Sri Lanka Peter Breuer and IMF Mission Chief for Sri Lanka Masahiro Nozaki said in a statement that the IMF Mission in Colombo has extended its stay by one day, as discussions are still underway with the authorities. They had stated that they planned to conclude the mission and issue a press release today.

Speaking to The Morning Business, Dr Wijewardena said that a preliminary agreement means Sri Lanka needs to have further consultations with the IMF to reach a staff-level agreement.

He said that the IMF team in Sri Lanka extended its stay by another day as the two parties had been unable to arrive at a final decision.

Further, he said that discussions with the IMF are towards the obtaining of an EFF as well as an RFI, which Sri Lanka did not opt for in 2020 when RFIs were handed to countries to address the economic impacts of the Covid-19 pandemic.

“The preliminary agreement is surely for two fund arrangements. The discussions are going on for both an EFF and RFI. The main reason an RFI is not available to Sri Lanka is because it is not a low-income country, but on this occasion, the RFI is being extended to Sri Lanka as a special case, considering the extraordinary situation we are facing,” he added.

In 2020, out of the countries in the South Asian region, Bangladesh and Pakistan received $ 488 million and $ 1.3 billion, respectively, under the RFI facility.

The former central banker said that Sri Lanka is set to receive a 100% quota of about $ 800 million under an RFI as an immediate payment and $ 3.2 billion under an EFF over a period of three years based on IMF Board approval.

Meanwhile, University of Colombo Lecturer Umesh Moramudali told The Morning Business that given the fact that the US is a big member of the IMF, implementing the policies suggested by the US, such as those related to ensuring the independence of the CBSL, will be required for IMF Executive Board approval.

“Sri Lanka would have to properly implement the reforms this time. We cannot get away by providing a statement on the Central Bank’s independence. The new Central Bank Act has to be implemented.”
Both Wijewardena and Moramudali stated that Sri Lanka’s human rights issues would not impact the staff-level agreement, but would play a role in obtaining approval for fund disbursement from the IMF Executive Board.

Courtesy:The Morning