Lanka goes to IMF for US$ 800m

Sri Lanka will apply to obtain up to USD 800 million worth of reserves from the International Monetary Fund (IMF) under the Special Drawing Rights (SDR) facility during August-September.

A senior Treasury official said that under the current allocation, Sri Lanka should obtain reserves amounting to about USD 800 million. The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies -- the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British sterling pound.

The SDR is deposited with the Central Bank of Sri Lanka’s (CBSL) reserve to stabilize the country’s foreign reserves over

the next few months, a senior CBSL official said. After Sri Lanka obtains the SDR, it sells the dollars to countries that purchases dollars, usually the US dollars.

The SDR will be vital to stabilise foreign reserves as the country has to pay off a sovereign bond repayment of USD 1 billion this month, the official pointed out. As of now, the country’s foreign reserves have dwindled to USD 4.2 billion.

The CBSL official, however, said the country would still need at least three investments amounting to at least USD 400 million each even with the SDR to offset the country’s immediate dollar shortage.

Meanwhile, the Finance Ministry has submitted a Cabinet paper proposing that an amnesty be declared for the public to bring in any undisclosed funds to Sri Lanka. Once those funds are declared, only a 1 percent tax will be declared on them, subject to the rest of the funds being invested in the country. The amnesty is proposed to be in effect till December 31, 2021.

Treasury officials are hoping that the proposal will be approved and the measure implemented by the end of this month.

The Treasury has also put on hold a CBSL proposal to impose a ban on what it terms ‘luxury items, such as mobile phones, TVs and refrigerators. The CBSL’s contention had been that there were enough stocks of these items available in the country for the next six months. However, the proposal has now been put on hold after it was leaked to the media, causing a public outcry.