Sri Lanka seeks US$ 395M RFI facility from IM

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Minister of Finance Ali Sabry has made a request for a Rapid Financing Instrument (RFI) with the International Monetary Fund (IMF), the Ministry said yesterday.

 However, this RFI payout is capped at 50% of the state’s quota for a year, which in Sri Lanka’s case works out to $395 million in special drawing rights, the IMF’s unit of account. 

According to the ministry statement the IMF has subsequently informed Minister Sabry that India had also made representations on behalf of Sri Lanka for an RFI. 

It had been communicated that IMF will consider the special request made despite it being outside of the standard circumstances for the issuance of an RFI.

Finance Minister Sabry met the Managing Director of the IMF, Kristalina Georgieva on 18 April at IMF Headquarters in Washington DC. 

The IMF has commended the steps already taken by the Finance Minister to mitigate the financial situation in Sri Lanka. 

The IMF has assured their fullest support to 

Sri Lanka and a positive response has also been received to expedite the process to strengthen the support extended towards Sri Lanka. 

Indian Finance Minister, Nirmala Sitharaman and a top level Indian Economic delegation also met Finance Minister Sabry at IMF Headquarters in Washington on 18 April.

 Minister Sitharaman assured Minister Sabry of India’s fullest support to Sri Lanka to move forward and has emphasised India’s commitment to strengthen the development of the economy in 

Sri Lanka and build stronger bonds between the two Nations as they move forward together. She also affirmed to Minister Sabry that India will fully support the deliberations of Sri Lanka with the IMF especially on the special request made to expedite an Extended Fund Facility. 

Further arrangements were made to hold several more rounds of talks on 19 April. Secretary to the Treasury, Mahinda Siriwardana and Governor of the Central Bank, Dr. Nandalal Weerasinghe also participated at these meetings.

Sri Lanka has already decided to prioritise payments for food and fuel imports over debt servicing.

According to IMF website, the RFI provides rapid and low-access financial assistance to member countries facing an urgent balance of payments (BoP) need, without the need to have a full-fledged programme in place. It can provide support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility. 

There are two windows under the RFI: (i) a regular window, for situations described above, with access limits of 50 per cent of quota in any 12-month period and 100 per cent of quota on a cumulative basis, and (ii) a Large Natural Disaster (LND) window, for cases where the damage suffered as a result of a natural disaster is assessed to be 20 per cent of GDP or more, with access limits of 80 per cent of quota in any 12-month period and 133.33 per cent of quota on a cumulative basis.

Financial assistance provided under the RFI is subject to the same financing terms as the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL) and Stand-By Arrangements (SBA), and should be repaid within 3¼ to 5 years.

(IG)