FINANCIAL CHRONICLE – Sajith Premadasa, the Leader of the Opposition in Sri Lanka, has called on the government to engage in discussions for a new agreement with the International Monetary Fund (IMF). He expressed concerns that the nation is unlikely to achieve its gross official reserves goal by March 2027 when the current program concludes.
According to Premadasa, Sri Lanka’s ongoing arrangement with the IMF, which includes a $3 billion external funding facility, is projected to wrap up in the first quarter of next year. He noted that reserves are expected to nearly double, rising to $14.2 billion from the current $7 billion.
“To close the gap, we would need to save $600 million in reserves each month over the next year. Currently, we are not on track to accomplish this,” Premadasa remarked in his statement.
Last year, the Central Bank was a net purchaser of $2 billion, and in the first four months of this year, it has acquired a net amount of $600 million. Despite these purchases, analysts indicate that the currency remained relatively stable until the recent crisis in the Middle East, after which it experienced a significant decline.
“I urge the government to initiate talks for a successor IMF program rather than renegotiating the existing one, which is ongoing,” Premadasa stated. “A successor program would take effect after the current one concludes. My proposal does not signify a retreat from fiscal discipline; rather, it represents the opposite.”
He highlighted that Sri Lanka cannot remain in a position of strength indefinitely, noting that the rupee has devalued by about 14% against the dollar in the past year. The country is also grappling with rising inflation due to surging import costs, leading analysts to anticipate that the Central Bank may need to increase interest rates in its upcoming monetary policy meeting.
“We have been through seventeen IMF programs. Each one that was initiated during a genuine crisis came after reserves had been depleted and the rupee was in freefall. In those situations, Sri Lanka had no option but to accept the terms proposed,” the Opposition Leader remarked.
“Currently, we have an opportunity. There is a chance to negotiate from a position of relative strength with $7 billion in reserves, an active program, and a track record of reforms. I urge this government to prepare for March 2027 and to communicate to the public Sri Lanka’s contingency plan should we fail to meet the IMF targets.”
