“Sri Lanka will approach creditors after IMF staff level agreement” | Daily News

“Sri Lanka will approach creditors after IMF staff level agreement”

Once the International Monetary Fund (IMF) staff level agreement is reached, Sri Lanka will approach creditors on debt restructuring, Central Bank Governor Dr. Nandalal Weerasinghe said.

Sri Lanka is expecting an IMF team towards the end of this month and intends to finalize a staff level agreement, he said.

The International Monetary Fund (IMF), global growth is estimated to moderate to 3.2% in 2022 from 6.1% recorded in 2021   

Accordingly, all the external creditors including commercial creditors, Paris Club members like Japan and Non Paris Club members such as China and India will be officially approached by the Government to seek relief.

“Once we reach the staff level agreement with the IMF, which will give us a clear picture on debt sustainability and debt targets for us to achieve in 10 years,” he said.

He expressed hope that all creditors will support Sri Lanka once the long-term structural reforms and economic policy adjustments programme is presented. Governor Weerasinghe addded that the programme will bring credibility in the overall process.

The impact of persisted supply side disruptions, primarily due to shortages of power and energy, and uncertainties associated with socio-political developments are expected to have caused significant adverse effects on economic growth in Q2 2022, while such impact is expected to have continued through Q3 2022 as well.

“That, coupled with the already recorded negative growth in Q1 2022 and contractionary policies, could result in a larger than expected contraction in real activity in 2022. However, real GDP growth is expected to recover in the period ahead, with the envisaged stabilisation of macroeconomic conditions and implementation of structural reforms in the economy.”

“The Monetary Board had one on one discussion with senior Management Boards of all the banks to ascertain risks, challenges that they might face due to contraction in economy and rising NPLs and to find solutions to curtail the negative impact on the banking sector.”

He stated that despite these challenges, the rupee liquidity situation in the banking sector is improving along with the improvements in the foreign currency liquidity.

Furthermore he said that the economy would contract to 8 % this year and with the sharper negative growth in the economy this year, Dr. Weerasinghe expressed hope that the economy would recover faster next year.

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