Despite political upheaval, SL’s chances of obtaining an IMF bailout remain good. Despite the country’s current leadership vacuum, a reputable economist is still upbeat about Sri Lanka’s chances of receiving a bailout package from the International Monetary Fund (IMF) by September or October after reaching a staff-level agreement, which is anticipated in about three weeks.
Shanta Devarajan, a professor at Georgetown University and a former chief economist for the World Bank (WB), who is also a member of the Presidential Advisory Group on Multilateral Engagement and Debt Sustainability, said on Bloomberg TV on Monday that the opposition groups in the nation are largely in agreement about a plan for economic reform backed by the IMF to get out of the current economic crisis.
As the technical negotiations with the IMF staff are being led by Central Bank Governor Dr. P. Nandalal Weerasinghe and Secretary to the Treasury Mahinda Siriwardana, who are not political appointees, a staff-level agreement with the IMF may be reached within the next three weeks, according to Prof. Devarajan.
The IMF staff and Central Bank officials, according to Dr. Weerasinghe, have already agreed on the monetary measures to be implemented as part of a comprehensive economic reform programme supported by an IMF Extended Fund Facility (EFF) arrangement, while an agreement on several fiscal measures, including tax and SOE reforms, is anticipated to be reached soon.
Prof. Devarajan anticipates that the government would obtain the IMF Executive Board’s approval for a bailout package by September or October after reaching a staff-level agreement. He told Channel News Asia that in order to get through the year, Sri Lanka could receive US $ 3–4 billion from the IMF and multilateral donor organizations like the World Bank and Asian Development Bank.
He emphasized that bridge finance would be crucial for the country to minimize the suffering on its inhabitants caused by the shortages of key items as the country has reached the top of the economic crisis.
Prof. Devarajan noted that the shortages are likely to persist for the next six to nine months, until the conclusion of a debt restructuring exercise with the country’s foreign creditors, despite the fact that an IMF programme would assuage shortages to some extent by reducing pressure on foreign exchange. However, he noted that after 1.5 years, when Sri Lanka regains access to foreign capital markets to acquire money, the proposed changes would serve as a springboard for the country to grow quickly and inclusively.