The IMF team will engage with the economic team of the Sri Lankan authorities from May 9-23 via a virtual mission and continue discussions on the authorities’ request for an IMF-supported program, IMF Mission Chief for Sri Lanka, Masahiro Nozaki told the Sunday Observer yesterday.
“We remain committed to assisting Sri Lanka, in line with the IMF’s policies. Because Sri Lanka’s debt is assessed as unsustainable, approval of IMF financing, including through a Rapid Financing Instrument, would need adequate assurances that debt sustainability will be restored,” he said.
The IMF’s Mission Chief said last week an IMF-supported program should be designed to resolve Sri Lanka’s acute balance of payments problems and put the economy back on a sustainable growth path as early as possible.
However, in a recent statement the IMF noted that Sri Lanka’s public debt is unsustainable and that under such a scenario it has to take steps to restore debt sustainability prior to lending.
The IMF team for Sri Lanka held initial technical discussions on an IMF-supported program with the local delegation.
The discussions covered recent economic and financial developments in Sri Lanka, the need for implementing a credible and coherent strategy to restore macroeconomic stability, and the importance of stronger social safety nets to mitigate the adverse impact of the economic crisis on the poor and vulnerable.
The IMF team welcomed the authorities’ plan to engage in a collaborative dialogue with their creditors.
According to Finance Minister Ali Sabry the Foreign reserves of Sri Lanka is less than US$50 million.
He said Sri Lanka should have gone to the global lender much earlier and floated the Rupee earlier to avoid adverse repercussions.
Sabry also said that it would take at least six months for the country to enter into a program with the IMF.
Sri Lanka is in discussion with several countries to secure bridging finance.
First Capital Research in an economic outlook report forecast growth to be between 0.5 percent to minus 1.6 percent in 2022.