The government entered into an agreement with the International Monetary Fund for $1.5 billion in loans. This is to help lower Government’s borrowing costs and bolster finances.
The Washington-based lender in a statement said, through a comprehensive set of reforms to the tax system, Sri Lanka has pledged to narrow its fiscal deficit to 3.5 percent of gross domestic product by 2020.
However that the loan program will need approval by the IMF’s executive board, which is due to consider it in early June.
The IMF said, once approved, it’s expected to turn an additional $650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion, over and above existing financing arrangements.
Central bank Governor Arjuna Mahendran in an interview last month said, Sri Lanka was looking for a loan of as much as $1.5 billion from the IMF as a seal of approval for the government’s policies in order to help draw further foreign inflows.
The IMF after the approval said, “The government is committed to dealing quickly with the legacy of Sri Lankan Airlines, which continues to represent a drain on public finances after years of mismanagement, going forward, key state firms will be governed transparently by annually published statements of corporate plans.”
Sri Lanka last sought an IMF loan in 2009 following the end of the war and under the leadership of Mahinda Rajapaksa, to bolster its international reserves.
The United People’s Freedom Alliance led government received the final tranche of the $2.6 billion IMF loan in 2012.
