Apr 27, 2017

Sri Lanka waits till June to get 3rd tranche of IMF EFF

The releasing of the $ 168 million third tranche of the International Monetary Fund’s US$1.5 billion Extended Fund Facility (EFF) scheduled for mid April this year is to be delayed till June, informed sources disclosed.

The IMF Executive Board comprising 24 directors headed by Managing Director Christine Lagarde will have to approve the third tranche after reviewing the IMF mission’s recent on Sri Lanka.

Normally this is being done couple weeks after the IMF spring meetings in Washington in April, but this time there was a delay till June this year.

IMF has warned on the impact of “external factors” on the Sri Lankan economy stating that the government had to strictly follow commitments made under a three-year Extended Fund Facility (EFF) agreement.

According to IMF statement, Sri Lanka’s international reserves had fallen short of projected targets. Progress on implementing “structural benchmarks” and some of the “reforms”—i.e., the sale of state owned enterprises—was “behind intended timelines.”

By February, the reserves recovered to $5.6 billion, according to the Central Bank, but Sri Lanka will require $7 billion by 2019 to cover loans and bridge rising fiscal deficit

The IMF mission said it had met Sri Lankan authorities and “discussed decisive actions to maintain the reform momentum in light of the uncertain external environment.”

The IMF noted that by 2019, the country needs to repay $3.99 billion to foreign creditors. Foreign reserves fell to $4.23 billion in November 2016.

According to the EFF agreement, Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB) are required to have formula that will allow them to recover costs according to the changes in the international energy markets.

A formula also supposed to be applied for water once the Public Utilities Commission of Sri Lanka (PUCSL) starts regulating that segment as well.

The government is also pushing ahead with restructuring state-owned enterprises despite the risk of a political backlash.

It announced in late March the first steps toward the privatization of “strategic assets” such as Ceylon Petroleum Corp., the Ceylon Electricity Board, the Sri Lanka Ports Authority and Sri Lankan Airlines.

Finance Ministry officials have also discussed the sale of “nonstrategic assets” ranging from a five-star hotel Hilton to Lanka Hospitals, formerly known as Apollo Hospitals.