SL receives final IMF tranche

Plans Extended Funding Facility

The eighth and final review of Sri Lanka’s Stand-by Arrangement (SBA) facility has been successfully completed by the International Monetary Fund (IMF), and the ninth tranche to the value of USD 415 million was disbursed recently.

With the release of the ninth tranche, the total amount of USD 2,548 million that was approved under the SBA facility in July 2009, has been received by Sri Lanka.

In a letter of intent requesting the IMF to complete the eighth review of the SBA, the Central Bank (CB) stated that although only a few months old, the policy measures taken by the CB to contain the deficit and thus reduce the financing need, has already delivered clear results.

“Credit growth has slowed, import growth has turned negative and the current account deficit has narrowed. At the same time banks have raised substantial amounts of capital abroad,” the CB said.

The bank also said that there appears to be strong prospects for issuing another sovereign Eurobond in the future and substantial foreign inflows into the stock market have materialized.

“The overall balance of payments should thus register a surplus in 2012, helping us increase reserve levels once again,” it noted.

The CB went on to state that it recognized the need to strengthen revenue administration, particularly in respect to VAT, and public financial management processes.

Meanwhile the Sri Lankan authorities are now looking forward to the continued close

Credit growth has slowed, import growth has turned negative and the current account deficit has narrowed. At the same time banks have raised substantial amounts of capital abroad

engagement with the IMF and intend to discuss the possibility of financial support for its economic development agenda under an Extended Fund Facility (EFF).

“This would continue to prioritize macroeconomic and financial stability and growth through prudent monetary and fiscal policies, while also addressing pressing concerns such as state enterprise performance, revenue administration and public financial management,” the CB said.

The SBA was approved on July 24, 2009 for an amount equivalent to 400 percent of Sri Lanka’s quota.

The completion of the SBA marks the longest engagement Sri Lanka has had with the IMF and the single largest facility Sri Lanka has ever obtained from a multilateral institution.