Sri Lanka should seek to amend the targets agreed upon with the International Monetary Fund (IMF) as part of the Extended Fund Facility (EFF) arrangement, according to Dr. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka (CBSL).
During an appearance on TV Derana’s current affairs program 360° last night (12), Dr. Weerasinghe mentioned that discussions on this matter are anticipated when an IMF team visits later this month. The IMF team is scheduled to arrive in Sri Lanka to discuss the fifth review under the 48-month Extended Fund Facility.
The CBSL Governor emphasized the need to revise targets due to unforeseen events such as Cyclone Ditwah, which severely impacted the country’s infrastructure and the livelihoods of its citizens. He highlighted that the annual budget, planned before the cyclone’s occurrence, along with other factors, should be considered during the upcoming review under the EFF program.
Dr. Nandalal Weerasinghe stated, “Whenever we work with the International Monetary Fund under its programs, actions are always based on the country’s situation at the time discussions take place. Future developments are projected, and policies and targets are set accordingly. Therefore, if there is any change in circumstances, the targets must inevitably change. This is a principle accepted by both sides.”
He further explained, “Although this was an unexpected development, the intention was to complete the fifth review by December 15, as originally planned. However, due to this cyclone, the government proposed that instead of the previously planned budget, there should be additional budgetary expenditure relevant to the coming year, and that the targets need to be revised. As a result, it was necessary to postpone the review. Time is required to assess these impacts.”
Dr. Weerasinghe indicated that a comprehensive review is essential before setting targets beyond next year. To allow time for this assessment, the review was deferred, and the rapid facility known as the RFI was deemed appropriate in this context. “We did not receive this in 2020 during COVID, because we did not have debt sustainability at that time. At present, since debt sustainability has been restored, there is no need to enter into new debt agreements or prolonged procedures. Within about two weeks, we can obtain the relevant funds, in addition to other facilities,” he noted.
The Central Bank Governor clarified that the fifth review was postponed to evaluate the economic impact of the cyclone and determine subsequent actions. He also mentioned that by the end of this year, Sri Lanka’s official foreign reserves are expected to approach US$ 8 billion.
