Online BusinessIMF inks pact with Sri Lanka on $2.5 bn loan
The International Monetary Fund (IMF) has reached an agreement with Sri Lanka to provide the island nation with about $2.5 billion, to help it in its reconstruction efforts.
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This is the first major IMF loan to Sri Lanka after the recent end of the civil war in the country in which the Liberation Tigers of Tamil Eelam (LTTE) was defeated.
"The reconstruction effort will be a large undertaking, with significant spending needs," IMF Managing Director Dominique Strauss-Kahn said.
"The government"s program aims to meet these needs while safeguarding debt sustainability by boosting revenue and reducing spending in other areas," he said.
This program will also provide a framework for international donors to assist the government in financing its reconstruction effort, he added.
Moreover, he said the end of the conflict provides Sri Lanka with a unique opportunity to undertake economic reform and reconstruction, which would be key to laying the basis for higher economic growth in the years ahead.
To this end, the government has formulated an ambitious program aimed at restoring fiscal and external viability and addressing the significant reconstruction needs of the conflict-affected areas, he said.
"The IMF staff supports this program, specifically the government"s goals of rebuilding reserves, reducing the fiscal deficit to a sustainable level, and strengthening the financial sector. It is also essential that the program cushion the most vulnerable from the needed adjustment," Strauss-Kahn said.
The IMF Managing Director said an IMF staff mission reached agreement with the Sri Lankan authorities on an economic program that could be supported by a 20-month Stand-By Arrangement for an amount equivalent to SDR 1.65 billion (about $2.5 billion).
"The program is expected to be considered by the Executive Board on July 24. The approval by the Executive Board would enable Sri Lanka to draw an amount equivalent to SDR 206.7 million (about $313 million) immediately," he said.