Lanka commences negotiations with IMF :

Stand-by Arrangement of US$ 1,900 million

In response to an offer of the International Monetary Fund (IMF) to support Sri Lanka during the current global financial crisis, the Government of Sri Lanka (GOSL), has sought a Stand-by Arrangement from the IMF, in the range of 300 per cent of Sri Lanka’s current quota with the Fund, which amounts to approximately US$ 1,900 million said a press release issued by the Central Bank of Sri Lanka.

While seeking this facility, GOSL has explained as to how the intensification of global financial crises in September 2008 has adversely impacted the favourable trends in several economic indicators, particularly those relating to the external sector.

Further, the IMF has been informed that the war against terror that has prevailed in Sri Lanka for nearly three decades at varying degrees, is now rapidly coming to an end, and that as a result, there is an immediate need for a large quantum of external financing in order to continue with the resettlement, rehabilitation and reconstruction work in the Northern Province, and the continued rapid development of the Eastern Province.

This is an essential expenditure, not only to uplift the living standards of the people in the areas affected by the decades long conflict, but also to successfully implement the Government’s efforts to bring a sustainable solution to the conflict.

The Government has pointed out that it has already made substantial progress in restoring normalcy and reviving economic activity in the Eastern Province, and has also just commenced resettlement, rehabilitation and reconstruction in the Northern Province. This momentum has to be intensified and widened in scope and reach, since the country has to make use of this window of opportunity to bring relief and hope to all who have suffered in this conflict.

The peace and socio-political stability that would be achieved as a consequence of such initiatives would, almost certainly, yield enormous economic and social benefits by way of rapid expansion of the domestic economy, mainly in the agriculture and fisheries sectors, as well as lead to the revival of the tourism industry.

The GOSL has further explained that the current global financial conditions are not conducive for any country to mobilize the required level of essential external financing, and that Sri Lanka is no exception.

Therefore, the availability of an IMF facility for balance of payments support at this time, would help to supplement the Government’s efforts to stabilize the external sector performance of the country, and enable the country to face the times ahead with greater confidence and certainty.

Such funds would be used to finance the new needs as well as to bridge any gap that may arise due to the global financial crises.

The GOSL expects the negotiations to be finalized by end March 2009 and a significant portion of the proposed facility disbursed up-front, immediately after the Executive Board of the IMF approves the facility.

It is also expected that such support would enhance the assistance from other development partners as well as significantly improve international investors’ confidence on Sri Lanka.