Sri Lanka Secures Fourth Tranche of IMF Bailout for Economic Recovery
Click to start listening
Synopsis
On March 1, the IMF's executive board confirmed the completion of the Third Review under the Extended Fund Facility with Sri Lanka, granting SDR 254 million to assist in economic recovery following the 2022 bankruptcy. The IMF noted robust performance and the necessity of ongoing reforms for sustained recovery.
Key Takeaways
- IMF grants SDR 254 million to Sri Lanka.
- Third Review under EFF completed.
- Strong performance noted by the IMF.
- Debt sustainability efforts progressing.
- India praised for its support in recovery.
Colombo, March 1 (NationPress) The executive board of the International Monetary Fund (IMF) has revealed that it has finalized the Third Review under the 48-month Extended Fund Facility (EFF) with Sri Lanka, granting the island nation immediate access to Special Drawing Rights (SDR) amounting to SDR 254 million (approximately US $334 million) to aid in its recovery from the 2022 bankruptcy.
The IMF stated that Sri Lanka's performance under the program has been robust, and the recent successful bond exchange represents a significant milestone towards reinstating debt sustainability. Reform initiatives are yielding positive results, with the recovery gaining traction, they noted. Given the economy's ongoing vulnerability, maintaining the reform agenda is essential to ensure a path towards enduring recovery and debt sustainability.
The statement continued that the IMF board has completed the third review under the 48-month Extended Fund Facility (EFF) arrangement, enabling the authorities to access SDR 254 million (around US $334 million). This brings the total financial support from the IMF disbursed thus far to SDR 1.02 billion (approximately US $1.34 billion).
"Reforms in Sri Lanka are yielding results, and the economic recovery has been impressive. Inflation remains subdued, revenue collection is on the rise, and reserves continue to build up," stated Kenji Okamura, IMF Deputy Managing Director, after the discussions.
He further remarked, "The recovery is anticipated to persist into 2025. The efforts to advance debt restructuring for restoring Sri Lanka's debt sustainability are commendable."
In 2022, Sri Lanka experienced a devastating economic and humanitarian crisis. The economy encountered immense challenges due to pre-existing vulnerabilities and policy errors leading up to the crisis, worsened by a series of external shocks. In 2023, the IMF sanctioned a 48-month extended arrangement under the EFF amounting to SDR 2.286 billion (approximately US $3 billion) to support Sri Lanka's economic strategies and reforms.
Recently, Sri Lanka's Foreign Minister Vijitha Herath commended India's pivotal role in aiding the debt restructuring initiative in the country.
He referred to India as a "trusted partner," stating, "India provided various types of assistance totaling nearly four billion USD in 2022 and was the first nation to offer financial assurances to the IMF, playing a crucial role in facilitating Sri Lanka's debt restructuring. During a time of significant challenges for the nation, without this support, Sri Lanka's recovery would not have been as rapid."
