IMF HAS ENDED USD 2.6 B BAILOUT PACKAGE OFFEREDTO LANKA:UNP

Govt. to borrow USD 1 B internationally, USD 500M from BOC: Harsha

The Government is planning to borrow USD 1 billion in the international markets besides attempting to borrow USD 500 million via the Bank of Ceylon. after the IMF had ended the US $ 2.6 billion bailout package charged UNP National List MP Dr. Harsha de Silva charged yesterday.

Following is the text of the statement issued by him yesterday explaining the current fiancial position of the country today.

“The verdict is out and for all practical purposes the IMF has abruptly ended the USD 2.6 billion bailout package to Sri Lanka with USD 800 million yet to be released given the failure of the Government to keep to the agreed targets; particularly with regards to the net international reserve target.

The unsustainable policy stance of fixing the currency at a highly overvalued and arbitrary level of LKR 114 to the USD by selling more than a third of the external reserves, most of it borrowed, and thereafter printing money to offset lost liquidity to maintain artificially low interest rates had resulted in a massive trade deficit and continued pressure on the LKR, Dr. de Silva said.

The trade deficit of close to USD 9 billion is unprecedented and unlike in previous years it cannot be offset by remittances and tourism earnings; a yawning gap of around 40 per cent remains. If, as the Governor says, Sri Lanka has more than sufficient reserves and thus there is no need for additional borrowing this year, then it is of no consequence that the IMF has stopped the facility. But, as was the case last week where the completely politicized Governor of the Central Bank attempted to fool the public by falsely stating a higher than actual rate of interest on the IMF loan, this statement is nothing but pure gobbledygook.

The Government is already planning to borrow USD 1 billion in the international markets besides attempting to borrow USD 500 million via the Bank of Ceylon. Given the history of our sovereign bond programme and the current global scenario Sri Lank will not be able to borrow for anything less than twice the rate offered by the IMF. Arrogance and incompetence of the regime will in the coming months begin to bite as the adjustment on the exchange rate will have to be much larger and the impact on the public will also increase.