Sri Lanka to take $1.5 billion IMF loan

Sri Lanka to take $1.5 billion IMF loan

Sri Lanka to take $1.5 billion IMF loan

Written by Staff Writer

29 Apr, 2016 | 9:53 am

Sri Lanka reached an agreement with the International Monetary Fund for $1.5 billion in loans to help lower its borrowing costs and bolster finances.

The Washington-based lender said in a statement that the South Asian nation has pledged to narrow its fiscal deficit to 3.5 percent of GDP by 2020 through “a comprehensive set of reforms to Sri Lanka’s tax system.”

The loan program will need approval by the IMF’s executive board, which is due to consider it in early June.

The IMF said that once approved, it is “expected to catalyze an additional $650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion, over and above existing financing arrangements.”

The International Monetary Fund noted that it has reached a staff level agreement with Sri Lanka on a three-year 1.5 billion US dollar Extended Fund Facility.

Todd Schneider, IMF mission chief for Sri Lanka, announced that following discussions held between IMF staff and the Sri Lankan authorities during the 2016 Spring Meetings in Washington, a staff-level agreement was reached on a three-year program to be supported by the IMF’s Extended Fund Facility (EFF).

In a statement Schneider said, the government’s economic program aims at fundamental changes to tax policy and administration to reverse a two-decade decline in tax revenues and put public finances on a sustainable medium-term footing.

The statement reads that furthermore, the government will seek to raise the tax-to-GDP ratio to near 15 percent by 2020 by implementation of a new Inland Revenue Act, reform of the VAT and the customs code.

This agreement will be subject to completion of prior actions and approval by the IMF’s Executive Board, which is expected to consider Sri Lanka’s request in early June.

In addition, the government also plans to secure financing from funds including the World Bank and the Asian Development Bank.

When Newsfirst made inquiries, Finance Minister Ravi Karunanayake noted that talks to secure financing are underway and that he would be able to share good news in the coming days.

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