Crisis-Ridden Sri Lanka Strikes Staff-Level Agreement With IMF On Loan: Report

Formal announcement likely on Thursday. Sri Lanka President Ranil Wickremesinghe Tuesday said talks were in 'final stage'.

File photo of Sri Lanka President Ranil Wickremesinghe speaking at Parliament in Colombo.

Source : AFP

Crisis-hit Sri Lanka is learnt to have reached a preliminary staff-level agreement with the International Monetary Fund (IMF) on an emergency loan. A formal announcement is likely on Thursday, news agency Reuters reported, quoting “four sources with direct knowledge of the matter”.

Reeling under its worst economic crisis since independence from the British in 1948, Sri Lanka had sought nearly $3 billion in loans from the IMF. It has been months since the country has been facing acute shortages of basic goods, leading to extreme price rise.

While the IMF and the Sri Lankan government has not made any official comments on the agreement yet, President Ranil Wickremesinghe told the country’s parliament Tuesday that their talks with the IMF had reached the "final stage", according to the Reuters report.

Wickremesinghe made the comment while presenting an interim budget for the rest of the year. "It is imperative that we use this opportunity to correct past mistakes and implement long-term policies that will stabilise the economy and take us out of the challenges we currently face," he was quoted as saying.

At the IMF, such staff-level agreements are usually subject to the approval of the management and the executive board. Once the nod is in, the recipient nations get access to the approved funds.

Meeting With IMF Went On Till Late Tuesday Night

Quoting its sources, the Reuters report said a visiting team from the IMF held talks with officials of the Sri Lankan government, including the treasury secretary, till late Tuesday night to “address concerns on the political front”, adding that most of the “technical details” had already been agreed to.

While the island nation was already under a severe financial crisis, it plunged into a political crisis last month when then-president Gotabaya Rajapaksa fled after a public uprising against the shortage of basic commodities and price rise.

Wickremesinghe took over as president soon, and has since been seen to be pushing to adopt fiscal consolidation measures that have been agreed with the IMF.

"The government has taken sufficient fiscal reforms, including the VAT hike in the interim budget as well as income tax raises ... which were pre-requisites from a fiscal angle to qualify for the staff-level agreement," Udeeshan Jonas, chief strategist at Colombo-based investment firm CAL Group, told Reuters.