SL Foreign financing gains momentum following IMF economic reforms.
By: Staff Writer
Colombo (LNW): In the wake of Sri Lanka’s moves to recover from an unprecedented economic crisis, the government‘s foreign financing is set to strengthen with the resumption of funding from bilateral and multilateral creditors the first half of this year
As such, disbursements and new financing commitments received from conventional bilateral creditors have poured in significantly during this period. .
Multilateral creditors continued their operations and some of their projects were repurposed to cater to the budget financing requirements of the Government, a finance ministry report indicated.
The Government of Sri Lanka and the World Bank, European Union (EU) and Agence Française de Development (AFD) have recently signed financing agreements to help strengthen Sri Lanka’s management of public finances.
The grant of EUR 9.8 million for Public Finance Management aims to support improving economic governance, transparency, and accountability in how public finances are spent.
Under the Extended Fund Facility (EFF) 2023-2026 of the International Monetary Fund (IMF), Sri Lanka received the first tranche of US$ 333 million to meet budget financing needs.
Furthermore, it is evident that the Emergency Credit Lines received from the Government of India helped substantially to ease the foreign currency needs for the importation of essential goods.
$131 million was received under the Credit Lines in the first quarter of 2023. Accordingly, the Government secured $ 670.3 million during the period OF 1Q 2023 under review.
The government has received $ 142.5 million from India, $114.2 million from the World Bank nd $ 58 million from the ADB.
Foreign financing from the donor countries has also come down with the Netherlands loan of $ 3.9 million and German grant of $ 1.3 million.
The Government obtained a total of $40.9 million in Official Development Assistance (ODA) commitments by entering into two grant agreements with the Government of Japan in the first quarter of 2023.
This consists of $ 37.1 million for fuel grant assistance under the Japanese Economic and Social Development Programme and $ 3.8 million for the improvement of infectious waste management extended by the Government of Japan. This grant commitment was made for the health and social welfare sector.
The grant of EUR 9.8 million for the Public Finance Management reforms is provided through a multi-donor trust fund that is financed by the EU and AFD and administered by the World Bank.
The World Bank Group CPF, lays out a two-phased approach that starts with a focus on urgent macro-fiscal and structural reforms and support to protect the human capital and most vulnerable population.
After the first 18-24 months, and subject to successful implementation of the reform program and international debt relief and financial support, the CPF focus will gradually shift to investments in longer-term development needs that will help promote private sector job creation.