Harsha says IMF cannot provide a loan if creditors discussions fail 

(the Morning. 1-07-2022)

By Imesh Ranasinghe 

The International Monetary Fund’s (IMF) hands are tied over helping help Sri Lanka, as it is unable to provide financing until the country comes to an agreement with its creditors, Opposition MP Dr. Harsha de Silva said.

Speaking to reporters yesterday (30), he said that even though Sri Lanka had sought help from the IMF 16 times earlier, about four or five programmes have been abandoned midway.

“However, this time it’s different from the other 16 times, as the hands of the IMF are bound; the IMF does not have the ability to provide us with a loan regardless of a staff-level agreement, If the discussions with the third parties (the creditors) are not successful,” he said.

He noted that the legal and financial advisors appointed by the Government, Clifford Chance and Lazard, are yet to start discussions with the creditors and are still gathering data.

Prime Minister Ranil Wickremesinghe said to Parliament that there are issues with data of creditors, as some data is missing and not updated.

Moreover, de Silva said that creditors will only agree on debt restructuring depending on how many deep economic reforms Sri Lanka is willing to agree upon.

Further, de Silva said that although Sri Lanka announced the suspension of debt repayment, it “cannot avoid all debt repayments”, as the loans taken from IMF, World Bank, Asian Development Bank (ADB), and the swap facilities from foreign Central Banks and local banks should be repaid.

De Silva said that Sri Lanka only has the option of finding $ 4 billion of bridge financing required for the next six months through diplomatic ties with countries such as India, China, Japan, Europe, America, Russia, and Bangladesh.

Also, yesterday, as its staff trip to Sri Lanka came to an end, the IMF stated: “During the in-person visit, the team witnessed some of the hardships currently faced by the Sri Lankan people, especially the poor and vulnerable who are affected disproportionately by the crisis. We reaffirm our commitment to support Sri Lanka at this difficult time in line with the IMF’s policies,”

In a statement, IMF said that the authorities’ monetary, fiscal policy and other actions since early April were important first steps to address the crisis.

They added that the staff team and the authorities made significant progress on defining a macroeconomic and structural policy package. The discussions will continue virtually with a view to reaching a staff-level agreement on the Extended Fund Facility (EFF) arrangement in the near term. Because public debt is assessed as unsustainable, Executive Board approval would require adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored.