Discussions with IMF ended successfully – PM tells Parliament

Discussions with IMF ended successfully – PM tells Parliament

July 5, 2022   11:01 am

Prime Minister Ranil Wickremesinghe says that Sri Lanka’s discussions with the International Monetary Fund (IMF) had ended successfully. 

He stated that the next step is to submit a report on debt restructuring.

Wickremesinghe stated this while delivering a special statement in Parliament on Tuesday (05) regarding the progress of negotiations with the IMF.

Sri Lanka has so far held several rounds of negotiations with the International Monetary Fund.

Meanwhile an IMF team had visited Sri Lanka last month for talks on a bailout program. The IMF team had visited visiting Colombo from June 20 to 30 to continue talks on what would be Sri Lanka’s 17th rescue program.

The prime minister said Sri Lanka’s negotiations with the IMF are more complex and difficult than in the past because it is a bankrupt nation.

Prime Minister Ranil Wickremesinghe told lawmakers that recent discussions with a visiting IMF mission were fruitful but not as straightforward as in the past.

“Our country has held talks with the IMF on many occasions before. But this time the situation is different from all those previous occasions. In the past, we have held discussions as a developing country,” Wickremesinghe said.

“But now the situation is different. We are now participating in the negotiations as a bankrupt country. Therefore, we have to face a more difficult and complicated situation,” he said in explaining a roadmap for recovery from Sri Lanka’s worst economic crisis in memory.

Wickremesinghe said earlier that a preliminary agreement has been submitted to the IMF’s board of directors for approval. “But due to the state of bankruptcy our country is in, we have to submit a plan on our debt sustainability to them separately. Only when they are satisfied with that plan can we reach an agreement at the staff level. This is not a straight-forward process,” said Wickremesinghe.

He said Sri Lanka’s financial legal advisors are working on a debt sustainability report to be submitted in August.

Discussions are underway with India, Japan and China to form an aid consortium once a staff-level agreement with the IMF is reached, Wickremesinghe said.

Sri Lanka suspended repayment on foreign debts worth about $7 billion that were due this year because its foreign exchange levels fell to record lows. The country’s total foreign debt is $51 billion, $28 billion of which must be repaid by 2027, an average repayment of about $5 billion a year.

Wickremesinghe said the Central Bank is forecasting an economic contraction of 4% to 5% this year. The IMF estimates Sri Lanka’s economy will shrink 6% to 7%.

Sri Lanka’s economy has been gutted by the pandemic, which compounded longstanding problems of economic mismanagement. It’s GDP fell to $76.2 billion in 2021, down from $94.4 billion in 2018 and won’t recover to the level it was at in 2018 until 2026, Wickremesinghe said. He said one government target was to achieve minus 1% growth by the end of next year.

Wickremesinghe presented the road map with proposed solutions to the existing economic problem to the Parliament today. 

The Prime Minister also said that by the end of this year, Sri Lanka will have to pay USD 3,489 million in debt.

He said that the debt will be USD 5,862 million in 2023, USD 4,916 million in 2024, USD 6,287 million in 2025, USD 4,030 million in 2026 and USD 4,381 million in 2027, etc.

“That means we have to pay USD 28 billion in total. This is where our debt burden lies. At the end of 2021, the government’s total debt burden is Rs. 17,589 million. By March 2022, it will be Rs. 21,969 million. This is the real situation. Today, our national debt is 140 percent of the gross domestic product.” 

With the IMF, we hope to make the gross domestic product 95 percent by 2032. Also, today our income is 7.3% of the country’s gross domestic income. We are looking to make it 14% by 2026. If we look at these statistics, it is clear what happened to the country.”

Meanwhile PM Wickramasinghe also said that if the leader of the National People’s Power (NPP), Anura Kumara Dissanayake, is able to rebuild the economy, he and the cabinet are ready to stepdown and make way for that.

Speaking further, the Prime Minister said that he is ready to provide NPP leader Anura Kumara Dissanayake with the opportunity if there is a possibility to recover the economy within 06 months as claimed by the latter.

-With agencies inputs

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