IMF team in town on a 10-day visit for crucial talks with Govt.

• PM Wickremesinghe keen to reach staff level agreement soon; analysts forecast completion of entire IMF engagement will spill over to 2023

A top-level team from the International Monetary Fund (IMF) will be in Sri Lanka today on a 10-day visit as part of the initiative to finalise a new support program.  

An IMF spokesperson said the team will continue discussions on an economic program that could be supported by an IMF lending arrangement, building on the progress made during the 9-24 May virtual mission. “We reaffirm our commitment to support Sri Lanka at this difficult time, in line with the IMF’s policies,” the spokesperson added.

Previously Prime Minister Ranil Wickremesinghe said Sri Lanka hopes to reach an IMF-staff level agreement by end June whilst others noted it could be much later.

Analysts said that the Government has to give a fiscal plan, an exercise which might take around two months even though the Finance Ministry has broader ideas about the way forward.

The IMF also needs to give a Debt Sustainability Analysis (DSA) to the Government after studying the Fiscal Plan. This phase may take a further two months.

With the DSA the Government appointed consultants (Lazard and Clifford, officials from which are also currently in the country) need to engage the creditors (ISB holders). Additionally, the Paris club and non-Paris club will also be engaged in parallel by the Government. “A holistic and equal treatment solution to all creditors must be agreed on. This could take approximately a year,” analysts opined.

“If there is progress between the Government, consultants and creditors, the IMF will feel satisfied  about work so far and deem that Sri Lanka is on path to debt sustainability. Thereafter they will agree for an Extended Funding Facility (EFF) which requires approval by the IMF Executive Board.  These requirements point to Sri Lanka completing the process only by July 2023,” analysts added.