IMF mulls replacing EFF with RFI for Lanka | Page 2 | Sunday Observer

IMF mulls replacing EFF with RFI for Lanka

19 April, 2020

The International Monetary Fund (IMF) has received a request from Sri Lankan authorities for emergency financial support under the Rapid Financing Instrument (RFI) and will begin coordinating with the authorities to assess the conditions, a senior official of the IMF mission in Sri Lanka told Sunday Observer Business on Friday. 

“We received a request from the Sri Lankan authorities for emergency financial support under the RFI. We will work in close coordination with the authorities to assess all relevant conditions,” IMF’s Acting Mission Chief for Sri Lanka Masahiro Nozaki said.

He said the Sri Lankan authorities also expressed interest in a range of options for future engagement with the Fund, and in this context, “we are discussing the option to replace the EFF (Extended Fund Facility) arrangement with the RFI.”  

 Director, Asia and Pacific Department of the IMF, Changyong Rhee,  at the Asia and Pacific Department media briefing last week, confirmed that the Fund had received a request from the Government for a RFI and that it would commence reviewing the request.

Sri Lanka’s EFF program which commenced in mid 2016 stalled following the reduction in taxes introduced early this year by the Government.

The multi-national donor downgraded Sri Lanka’s economic growth to a negative 0.5 percent this year while expressing uncertainty about growth prospects of the Asia-Pacific region in 2020.

“This is a crisis like no other. It is worse than the Global Financial Crisis, and Asia is not immune.

While there is huge uncertainty about 2020 growth prospects, and even more so about the 2021 outlook, the impact of the coronavirus on the region will — across the board — be severe and unprecedented,” the IMF in a recent review stated.

It said, “Growth in Asia is expected to stall at zero percent in 2020. This is the worst growth performance in almost 60 years, including during the Global Financial Crisis (4.7 percent) and the Asian Financial Crisis (1.3 percent). That said, Asia still looks to fare better than other regions in terms of activity.

“The global economy is expected to contract in 2020 by 3 percent — the worst recession since the Great Depression. This is a synchronised contraction, a sudden global shutdown. Asia’s key trading partners are expected to contract sharply, including the United States by 6.0 percent and Europe by 6.6 percent.”

The coronavirus pandemic will turn global economic growth "sharply negative" this year, the head of the International Monetary Fund (IMF) Kristalina Georgieva has warned.

She said the world is faced with the worst economic crisis since the Great Depression of the 1930s.

She forecast that 2021 would only see a partial recovery.Access to RCF financing is determined on a case-by-case basis, taking into account the country’s balance of payments needs, the strength of its macroeconomic policies, capacity to repay the Fund, the amount of outstanding Fund credit, and the member’s record of past use of ]credit.

Under the RCF, access is normally limited to 18.75 percent of quota per year and 75 percent of quota on a cumulative basis, although augmented access limits apply under the RCF’s shocks window (37.5 percent of quota per year and 75 percent on a cumulative basis).

Financing under the RCF carries a zero interest rate, has a grace period of 5½ years, and a final maturity of 10 years.