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Thursday Nov 14, 2024
Friday, 18 January 2019 00:00 - - {{hitsCtrl.values.hits}}
The Government is in talks with the International Monetary Fund (IMF) to shift fiscal targets, eyeing elections that would give it space to funnel funds to development programs such as “Gamperaliya”, and increase the number of Samurdhi recipients.
Central Bank Governor Dr. Indrajit Coomaraswamy was part of the Government delegation, led by Finance Minister Mangala Samaraweera, which had talks with the IMF this week.
Following the discussion with IMF officials, which included IMF Managing Director Christine Lagarde, the IMF issued a statement saying it supported the Government’s efforts and a team would arrive in Sri Lanka in mid-February to continue talks.
“Why the Finance Minister went to Washington is because since 26 October, the facts on the ground have changed, both in terms of politics and also changes in the economy. He wanted to make the point that Sri Lanka wanted to continue engagement with the IMF. He also made the point that facts on the ground have changed to the point that we need greater flexibility on their part. Their response was they understood what had happened, and they were willing to be flexible. Now what needs to be worked out is how much flexibility they can show,” the Governor said.
“The main area where we are asking for flexibility is in the fiscal targets. The primary surplus target was to be 1.8% of GDP, but the Government thinks this is too high and is trying to negotiate it down, and the idea is to create fiscal space for two types of programs. One is for growth oriented fiscal programs, like Gamperaliya, which puts money into rural areas for infrastructure and secondly to strengthen the social security net. There are a number of people who are eligible for Samurdhi payments who are not on the list and the IMF is willing to consider this as well,” he added.
The IMF team will be in Sri Lanka for two weeks to negotiate a framework that will include assistance to the Government to partly address why Sri Lanka is seeing persistently low growth. The IMF program was detailed during the Constitutional crisis. On 26 October, the Government and IMF had agreed on a staff level agreement, which together with parliamentary approval for the Central Bank to raise Rs. 310 billion for liability management, was to provide the foundation to raise funds for debt repayments.
“Because plans have been delayed by a couple of months, there has been a real squeeze, because you have the frontloaded repayment in 2019, and the two month delay in our borrowing program. So that is what we are now scrambling to make up for, because we can’t wait for the staff level agreement with the IMF in March. The Finance Minister went to Washington to get a positive signal from the IMF and they were very responsive.”
