On December 12th, the Executive Board of the International Monetary Fund (IMF) is scheduled to consider the first review of Sri Lanka's 48-month Extended Fund Facility (EFF) Arrangement. The review is set to include a request for a waiver of nonobservance of performance criterion, a request for modification of performance criteria, financing assurances review, and rephasing of access.
The EFF Arrangement was granted to Sri Lanka in March 2021, worth a total of USD 2.9 billion, in an effort to stabilize the country's struggling economy. Sri Lanka faced its worst financial crisis in seven decades last year as foreign exchange reserves reached record lows. Since then, the country has managed to partly stabilize its economy, control inflation, and rebuild currency reserves with the help of the IMF bailout.
An IMF mission visited Sri Lanka from September 14-27 for the first review of the EFF-supported economic adjustment program. In October, the IMF and Sri Lanka reached a staff-level agreement on economic policies as part of the review process. Once approved by the IMF Management and Executive Board, the first review is expected to unlock the second tranche of the arrangement, worth around USD 330 million in financing. This will bring the total IMF financial support disbursed to Sri Lanka to USD 660 million.
Sri Lanka has also reached in-principle deals with the Export-Import (Exim) Bank of China, its largest bilateral creditor, and the Official Creditor Committee (OCC) to restructure the country's debts.
The EFF Arrangement aims to support Sri Lanka's economic reforms, including fiscal consolidation measures, addressing the country's debt burden, and improving the business climate. The IMF's support is critical to Sri Lanka's economic recovery, which has been severely impacted by the COVID-19 pandemic.
