IMF reaches staff-level agreement with Sri Lanka

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Sri Lanka has reached a staff-level agreement with the International Monetary Fund (IMF).

Accordingly, the IMF has agreed to support Sri Lanka’s economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about USD 2.9 billion.

“The objectives of Sri Lanka’s new Fund-supported program are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential,” the IMF said in a statement.

The IMF also said that debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.

The Fund also noted that financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making an effort to reach a collaborative agreement with private creditors are crucial before the IMF can provide financial support to Sri Lanka.

Sri Lanka has been facing an acute crisis. The economy is expected to contract by 8.7 per cent in 2022 and inflation recently exceeded 60 per cent. The impact has been disproportionately borne by the poor and vulnerable.

“Against this backdrop, the authorities’ program, supported by the Fund, would aim to stabilize the economy, protect the livelihoods of the Sri Lankan people, and prepare the ground for economic recovery and promoting sustainable and inclusive growth,” the IMF said.