IMF Mission Chief for Sri Lanka Masahiro Nozaki in a latest statement noted the IMF is following developments in Sri Lanka closely and are concerned about rising social tensions and violence.
On our virtual mission during May 9-23, discussions at the technical level have just started and continue as planned so as to be fully prepared for policy discussions once a new government has been formed, Nozaki said adding the IMF remains committed to assist Sri Lanka in line with the IMF’s policies.
Violence in Sri Lanka erupted following the attacks on peaceful demonstrations for political reforms in Colombo last week.
However, economists and Colombo based think tanks have warned of dire consequences to the economy of the ongoing tensions in the country which would lead to an inevitable withdrawal of global support to the country.
Political and social stability are key factors for economic growth and at this moment for the global community to aid an ailing economy, said an economist.
On the progress of discussions wit the global lender the IMF team commenced technical level discussion this week with Sri Lanka.
However, without a stable government and social unrest continuing progress of negotiations for any program with the IMF will be hampered according to think tanks.
The IMF team commenced discussion with the economic team of the Sri Lankan authorities on Monday in a virtual mission and continue discussions on the authorities’ request for an IMF-supported program.
However, Nozaki said the IMF remains 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 require adequate assurances that debt sustainability will be restored.
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 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 current 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 current Foreign reserves in Sri Lanka is lesser 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 discussing with several countries to secure bridging finance.
First Capital Research in an economic outlook report forecast growth to be between 0.5 percent to a minus 1.6 percent this year.