The country has no need to raise emergency funds, though the government may decide to make a formal request to the International Monetary Fund (IMF) for “some sort of arrangement” between Sri Lanka and the multilateral lender, Central Bank Governor Arjuna Mahendran said.
“The government at the moment is in informal consultation (with IMF). As part of that consultation, the government may decide to make a formal request for some sort of arrangement between the IMF and Sri Lanka. But it is at a very early stage, nothing has been decided so far,” Mahendran said.
Sri Lanka is still a beneficiary of an IMF stand-by-facility obtained in 2009, and as a result, IMF sends teams twice a year. A team from IMF is due in February this year.
According to Governor Mahendran, the country’s foreign reserves are at comfortable levels—4.5 months worth of imports—though he admitted that some of that were borrowed.
“But the country is in no dire need of any emergency funding of any sort and therefore may be there’s no need to speculate that the IMF is coming for the rescue of Sri Lanka.” Deputy Governor Nandalal Weerasinghe said Sri Lanka total debt payments inclusive of interest and IMF payments in the next 12 months stand around US $ 2.3 billion.
He also said that there is US $ 2 billion worth of long term swap obligation which would be rolled over at current market rates as per the agreements. “Swaps are rolled over every year at current market rates, those moneys are not going out,” he noted.
Governor Mahendran said one of the reasons Sri Lanka is talking to the IMF and the World Bank was to refinance these swaps, obtained through state banks such as the Bank of Ceylon, at concessional rates. “There is absolutely no cause for alarm,” he asserted. Sri Lanka’s economy grew 5.2 percent in the first 9 months of 2015 against 2.4 percent in the corresponding period of the previous year. The fiscal deficit in the first 9 months is estimated at 5.1 percent up from 4.8 percent in the same period of the previous year. Sri Lanka targets a 5.9 percent budget deficit for 2015.