The International Monetary Fund’s (IMF) response to the news that Sri Lanka has been able to secure a swap facility of 10 billion Yuan (US$ 1.5 billion) from the People’s Bank of China is “quite surprising”, Money and Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal tweeted yesterday.
Minister Cabraal said that although the request for COVID assistance was made by the Government from the IMF early last year at the time the COVID pandemic started “the IMF was dragging its feet in providing that facility”.
“Nevertheless, the Government managed to effectively provide the necessary relief and support to the Sri Lankan people as well as maintain a framework of sound macro fundamentals even without such financial support,” the Minister said.
During a press briefing yesterday, the Director of the Communications Department of the International Monetary Fund, Gerry Rice responding to questions said the IMF was monitoring Sri Lanka’s economic policy financial developments including the recent agreement on a swap line with the People’s Bank of China.
He was asked about Sri Lanka’s planned US$ 1.5 billion currency swap with China and the fact it is portrayed as a way of showing ‘resistance’ to IMF programs.
“On Sri Lanka, just a reminder, the extended Fund program with the IMF was approved in 2016. That expired last year, June 2020.”
“We did receive a request from the Sri Lankan authorities for emergency financial support to help fight the COVID pandemic,” the IMF spokesman said.
He stated that the assessment of that support has taken longer than for other countries due to “Sri Lanka’s daunting economic challenges and high public debt.”
Rice said they have sought, but not reached an understanding, on how to fulfill the key requirements for what could be a rapid financing instrument which would include policies to continue ensuring debt sustainability to address the balance of payment challenges including from the COVID‑19 impact on tourism and to preserve international reserves.
