IMF review agreement will help Sri Lanka fast-track debt restructuring: state minister

The staff level agreement on the first review of the International Monetary Fund (IMF) programme will enable multilateral agencies to disburse remaining installments and help fast-track debt restructuring, State Minister of Finance Shehan Semasinghe said.

“This was much needed to strengthen economic stability, and after the IMF’s executive board approves [it], Sri Lanka will receive the second installment of 330 million US dollars [of the Extended Fund Facility],” Semasinghe tweeted on Friday morning after the IMF announced the agreement.

The state minister said the staff level agreement(SLA) will enable the World Bank, the Asian Development Bank and other multilateral financial institutions to disburse remaining installments.

“The SLA will enhance confidence in our economy and help fast-track the debt restructuring resolution with international partners,” he said.

The official also noted Sri Lanka is the first country in Asia that has undergone the IMF Governance Diagnostics exercise, the government having published a governance diagnostics report with the assistance of the international lender.

“We are committed to implementing key recommendations of the Governance Diagnostics Report which will help address corruption risks and strengthening accountability essential for rebuilding economic confidence and making growth more robust,” said Semasinghe.

His colleague State Minister of Finance Ranjith Siyamabalapitiya also told reporters Friday morning that consequent to the staff level agreement, Sri Lanka will be able to work other creditors such as India, Japan and the Paris Club based on the agreement.

“A report on this will be given to the IMF executive board. After the board has approved it, we can reach an agreement on the release of the second tranche,” said Siyamabalapitiya. “We have overcome the hurdle of securing the Staff Level Agreement (SLA). In simple terms, this process is going well,” he added.

The IMF said it reached the SLA with the Sri Lankan authorities on economic policies to conclude the first review of the 48-month Extended Fund Facility-supported programme. The conclusion of the review would allow Sri Lanka to access a 330 million dollars worth second tranche of the 3 billion dollar deal in financing once the review is approved by IMF management.

In addition to the staff level deal, the completion of the review also requires progress on debt restructuring.

“Macroeconomic policy reforms are starting to bear fruit and the economy is showing tentative signs of stabilisation,” the IMF said in its statement after reaching the Staff Level Agreement.