CB Governor continues his guess work on IMF EFF approval deadline
Central Bank Governor Nandalal Weerasinghe continues guessing off the top of his head for the third time relating to the date of receiving International Monetary Fund’s (IMF) approval for the US $ 2.9 billion bail out loan extending it first half of this year following his unrealistic deadlines of January 2023 and December 2022.
Sri Lanka has already missed the Central Bank Governor’s December 2022 deadline and it is about to miss his prediction of the January 2023 date, official sources said.
In a report, Standard Chartered Bank revealed that IMF board approval could happen in Q2-2023 (versus Q1 previously) given delays in securing financing assurances from bilateral creditors.
This could further delay negotiations with commercial creditors, which it expects will be pushed back to H2 and as a result a restructuring deal to be reached only by end-2023.
President Ranil Wickremesinghe disclosed that the government expects the IMF-EFF to be received in the first half-2023.
India has already given its assurance regarding Sri Lanka’s debt restructuring while China Japan follow suite soon he said adding adding that another round of discussion with China is underway,
Confirming the President’s deadline of Q2 2023 State Minister of Finance Shehan Semasinghe disclosed that Sri Lanka is in the final stages of providing a guarantee from the creditors to the IMF on debt restructuring.
Central Bank Governor Nandalal Weerasinghe told a recent media conference if Sri Lanka misses the board approval in December it plans to appear before the IMF Board in January 2023 and is optimistic that it would shortly receive assurance from bilateral creditors including China and India.
The International Monetary Fund says it is difficult to predict the dead line of approving the extended fund facility of US$2.9 billion as the assurance of all the creditors is must for this purpose.
“There has been good progress this month with India already pledging financing assurances. We expect assurances from China and Japan soon,” Weerasinghe said at an event titled “Economic Outlook 2023”.
India last week told the IMF that it strongly supports Sri Lanka’s debt restructuring plan.
“Once the IMF program is unlocked then we will start specific debt restructuring negotiations with both commercial and bilateral lenders,” he said.
“We hope to complete this process in six months. The biggest uncertainty is the timeframe for the debt restructuring. It is only after debt sustainability is assured can Sri Lanka return to a sustainable growth path,” he added.
Speaking at the Ceylon Chamber of Commerce launch of its economic outlook, Weerasinghe said tightening of the monetary policy and other measures by the Central Bank ensured that contraction of the economy in 2022 being limited to single digit and not double digit as well as avoid hyperinflation of over 100% inflation.
“CBSL didn’t contract the economy but rather our measures, even though difficult, helped to minimise the damage to growth and inflation,” he said.
His remarks were an apparent response to criticism against the current regime at CBSL that its policies indeed led to shrinking of the economy whilst the high interest rate regime has come under constant flack.