IMF loan will help bring down interest rates – CBSL

By Saman Indrajith

Interest rates could be relaxed with a cash infusion via the IMF, the Central Bank officials, including Governor Dr. Nandalal Weerasinghe, told the Committee on Public Finance (CoPF) recently.

Dr. Weerasinghe said high interest rates had been adopted to limit growth to prevent the need for greater foreign exchange given the dwindling reserves.

“With a cash infusion via the Extended Fund Facility (EFF) from IMF, interest rates can once again be relaxed, and the market will once again have an opportunity to expand,” Weerasinghe said.

The Chairman of the CoPF said the Committee was committed to providing bipartisan support to the reforms put forward by the IMF.

The Committee is chaired by MP Dr. Harsha De Silva said that regardless of political allegiances, its members will stand by the reforms promulgated by the IMF and being executed by the Central Bank (CB). This comes in the wake of a Central Bank confirmation that they are confident of having an actual IMF first tranche disbursement within the 1st Quarter of 2023.

CoPF inquired about the severe social implications of such steep mechanisms to adhere to IMF conditions. The CB said the IMF was wary of the social impact to vulnerable communities and had proposed certain safeguards such as expenditure ceilings to negate those effects.

When the question of alternatives to an IMF bailout were discussed, the CB stressed that no other international financing/funding institute was willing to partner with Sri Lanka on its debt management unless they saw an IMF partnership materialize first.

With the ostensible debt treatment measures that an IMF programme accompanies, it reassures international agencies of Sri Lanka’s credibility to once more partner with the country for future ventures including debt management.