Have Mechanism to Solve SL’s High Debt Level - IMF Mission Chief
By Paneetha Ameresekere .
IMF Staff have sought, but not reached understanding on how to fulfil key requirements under IMF’s Rapid Financing Instrument (RFI) for economically distressed countries like Sri Lanka, due to the COVID-19 Pandemic, which include policies to continue ensuring debt sustainability, IMF Mission Chief for Sri Lanka Masahiro Nozaki told this reporter on Friday (7). He was responding to a question asked by this reporter on Wednesday (5) on possible IMF support to Sri Lanka’s COVID-19 hit economy.
He further said that policies to assure debt sustainability are the riddle that has to be solved to answer this question.
The question posed by this reporter to Nozaki was: “As you may be aware, Sri Lanka is facing both a health and an economic crisis driven by the COVID-19 Pandemic.
Sri Lanka’s economy shrank to its lowest, to 3.6% in 2020. Complementing this, public debt stood at 109.7%, which I think is also a record. Further, the Central Government debt stood at a 16-year high of 101% of GDP, fiscal deficit at 11.1% of GDP (32 year high) and, according to the World Bank, poverty rose to 11.7% last year, from 9.2% in 2019, also, the country’s foreign reserves are currently at a 12-year low. In that situation, what can, a) Sri Lanka do and b) IMF do, to alleviate the country from the present crisis?”
Nozaki in reply said: “We stand ready to discuss all options of engagement with Sri Lanka, including financial support, if requested by the authorities. In April 2020, we received a request from the Sri Lankan authorities for emergency financial support under the Rapid Financing Instrument (RFI). Assessing relevant conditions for the RFI has taken longer than for other countries, due to Sri Lanka’s daunting economic challenges and high public debt. Staff have sought but not reached understanding on how to fulfill key requirements for the RFI, which include policies to continue ensuring debt sustainability.”