An International Monetary Fund mission visit to Sri Lanka is unlikely to lead to an immediate staff-level agreement to keep a $3 billion bailout on track and unlock more funds from the program, according to a person familiar with the matter.
(Bloomberg) — An International Monetary Fund mission visit to Sri Lanka is unlikely to lead to an immediate staff-level agreement to keep a $3 billion bailout on track and unlock more funds from the program, according to a person familiar with the matter.
Sri Lanka will now have to hold more discussions with the multilateral lender to ensure it can meet targets, said the person who asked not to be identified as the matter is not public. The talks could be held in Morocco on the sidelines of the annual IMF meetings next month, or in Washington shortly after, the person added.
IMF representatives have been carrying out the first on-site review, which ends on Wednesday after two weeks. Officials are expected to hold a press conference in Colombo later on Wednesday and issue a statement on the conclusion of their visit.
Officials from Sri Lanka’s central bank and the government didn’t respond to a request for comment. IMF’s Colombo officials weren’t immediately available for a comment.
The IMF’s loan program has been a catalyst for Sri Lanka’s economy to recover after the worst crisis in its independent history. As part of the bailout, which calls for reforms in state-owned enterprises and efforts to bolster revenue generation, authorities also need to bring the nation’s debt to a sustainable level after an unprecedented default last year.
Sri Lanka has exceeded IMF performance targets on inflation, foreign reserves and the primary deficit, although an indicative target on revenues fell short, according to earlier statements made by government officials.
A staff level agreement outlines the next set of revised targets and reform measures for subsequent reviews. The completion of the first review and a subsequent IMF board approval would lead to the disbursement of $330 million for the second tranche.
“If there is an immediate staff level agreement, it is more positive,” said Udeeshan Jonas, chief strategist at CAL, a Colombo-based investment banking group.
Sri Lanka had a revenue shortfall in June and the IMF would be looking for measures, including boosting taxes in the budget due in November, to stop further declines, he said.
–With assistance from Asantha Sirimanne.
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