Sri Lanka requests $3.0 billion under IMF’s Extended Financing Facility

| Updated:
Jun 01, 2022 9:09:01 p.m.

Sri Lanka is in talks with the International Monetary Fund (IMF) to borrow at least $3 billion through the lender’s Extended Financing Facility (EEF), sources familiar with the matter told Reuters.

The island state’s government expects a new round of technical talks with the IMF in early June and hopes to reach a staff-level deal as early as the end of this month, two of the sources said, speaking under cover of anonymity.

An IMF spokesperson did not immediately respond to a request for comment. Spokespersons for Sri Lanka’s finance ministry and central bank did not respond to a request for comment.

Sri Lanka has requested a bailout to overcome its worst economic crisis since its independence in 1948. It defaulted on some overseas debt earlier this year and is struggling to pay for imports of basic commodities such as fuel and medicine.

An EFF program, which would be the IMF’s 17th plan for the nation, requires countries to undertake structural economic reforms “to correct deep-seated weaknesses”, according to the IMF’s website. These programs normally last for three years with a grace period of 4.5 years to begin repaying the loan, once the plan is approved.

A $3.0 billion deal would be almost four times the country’s IMF quota.

The IMF said last week it was in talks with Sri Lanka for a “comprehensive” reform package, but did not say what kind of program was being negotiated.

Prime Minister Ranil Wickremesinghe, who took office in May after mass protests forced the resignation of his predecessor, Mahinda Rajapaksa, plans to present an interim budget within weeks.

The government on Tuesday announced a tax overhaul to boost revenue, raise corporate tax and raise the rate of value added tax (VAT) to 12% from 8% with immediate effect.

Sri Lanka recently appointed financial and legal advisers to kick off talks with bondholders and bilateral lenders, such as China and Japan.

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