IMF Completes Sri Lanka’s First EFF Review, Paving Way for Critical Loan Tranche
The International Monetary Fund (IMF) announced the successful completion of the initial review under Sri Lanka’s 48-month Extended Fund Facility (EFF) arrangement. This achievement signifies the immediate release of the much-awaited second tranche of the IMF loan, totaling SDR 254 million (around USD 337 million), bringing the cumulative IMF financial support to SDR 508 million (approximately USD 670 million).
Approved in March 2023, Sri Lanka’s EFF Arrangement stands at SDR 2.286 billion (about USD 3 billion). IMF’s Deputy Managing Director, Kenji Okamura, lauded Sri Lanka’s performance under the EFF-supported program, citing it as ‘satisfactory.’ While most performance criteria and indicative targets were met, there were exceptions regarding expenditure arrears and tax revenues for end-June.
Facing its severest financial crisis in decades due to plummeting foreign exchange reserves last year, Sri Lanka secured a USD 2.9 billion IMF bailout in March 2023. Subsequently, the nation has made significant strides in stabilizing its economy, curbing inflation, and rebuilding currency reserves.
The EFF program aims to aid Sri Lanka in restoring macroeconomic stability, ensuring debt sustainability, preserving financial stability, and fostering growth-oriented structural reforms.
Simultaneously, Sri Lanka has reached preliminary agreements with China’s Export-Import Bank (Exim) and the Official Creditor Committee (OCC) to restructure its debts.
On November 29, the Sri Lankan government and OCC reached an in-principle agreement on the financial terms of debt treatment, covering around USD 5.9 billion of outstanding public debt. This arrangement involves a combination of long-term maturity extension and reduced interest rates.
This agreement with the OCC followed a similar deal with China’s Exim Bank, covering approximately USD 4.2 billion of outstanding debt.
Mr. Okamura stressed that Sri Lanka’s in-principle agreements with the OCC and China’s Exim Bank align with the EFF targets, positioning Sri Lanka’s debt on the path toward sustainability. He emphasized the criticality of swiftly finalizing and signing the agreement with official creditors.
Furthermore, he underscored the necessity of maintaining reform momentum and taking ownership of reforms to ensure a comprehensive and swift recovery.
