IMF delays Sri Lanka’s loan discussion amidst political crisis
The International Monetary Fund (IMF) said yesterday it had delayed discussions on Sri Lanka’s next loan tranche due to the country’s political crisis.
The IMF has disbursed over US$1 billion (FJ$2.12bn) out of a US$1.5bn (FJ$3.18bn) threeyear extended fund facility (EFF) loan it agreed in 2016.
The aim was to avert a financial crisis and support the economic reform agenda of the government then in power.
That government was sacked on October 26 by President Maithripala Sirisena due to differences with former prime minister Ranil Wickremesinghe, who was backing social market economic policies.
Since the removal of Wickremesinghe, Sirisena has dissolved the parliament and called for a fresh election, but the Supreme Court last week ordered a suspension of that decree until it had heard petitions challenging the move as unconstitutional.
In September, the IMF said its mission had made significant progress toward “reaching a staff-level agreement with the government on completing the fifth review of the EFF and discussions will continue during the annual meetings of the IMF and World Bank in October.” Yesterday an IMF spokesperson told Reuters via email: “We are monitoring the situation and remain in close contact with our technical counterparts in Sri Lanka.” “Programme discussions on the 5th review of the IMF’s Extended Fund Facility are currently on hold, pending clarity on the political situation.”
After completion of the fifth review Sri Lanka would expect to receive a sixth tranche of about US$250m (FJ$530.11m). The total loan was expected to have been disbursed with a seventh tranche by mid 2019.
The political crisis has hit the economy. Already the rupee currency has fallen about 1.8 per cent since the crisis unfolded last month. On Monday, the rupee fell to a record low of 177.20 per US dollar.
Foreign investors have pulled out more than 30 billion rupees (RM707.4 million) since the crisis unfolded on October 26.
Moody’s also downgraded Sri Lanka yesterday for the first time since it started rating the country in 2010, blaming a political crisis for exacerbating already problematic finances.