On Thursday, October 19, the International Monetary Fund (IMF) revealed that it has concluded a deal with Sri Lanka for the release of the second portion of a $3 billion loan, aimed at supporting the nation in its efforts to recover from its most severe economic downturn.
The recommendation to provide around $330 million to the South Asian country was made after an agreement was reached over the first review of the four-year Extended Fund Facility (EFF) agreement which was signed up in March, said the International Monetary Fund (IMF), in a statement.
It added that the release of the funds depended on the approval of its executive board. Last year, the government of Sri Lanka defaulted on its $46 billion debt at a time when millions of people faced months of fuel and food shortages.
“The authorities remain committed to the ambitious reform agenda under the EFF and their reform efforts have been commendable,” said IMF Senior Mission Chief for Sri Lanka, Peter Breuer, and his deputy, Katsiaryna Svirydzenka, in a statement.
The IMF emphasised Sri Lanka’s “rapid” disinflation from 70 per cent in September last year to only 1.3 per cent by September this year, along with a “significant fiscal adjustment expected by the end of this year.”
The IMF added that there was an increase of $1.5 billion in gross international reserves between March and June this year, as the shortage of essential items declined.
However, “Despite these early signs of stabilisation, full economic recovery is not yet assured” they stated.
Chinese President Xi Jinping, while speaking to his Sri Lankan counterpart Ranil Wickremesinghe on Friday (Oct 20), said that it will aim to deepen “mutual trust” with Sri Lanka, which is trying hard to recover from its worst-ever economic crisis.
China is the biggest creditor of Sri Lanka and needs to give its approval for any proposal made by Colombo with the aim of restructuring its debt.
The deputy finance minister of Sri Lanka last week said that the state-owned Export-Import Bank of China had permitted a reorganisation of the finances of the country.