Sri Lanka should seek to change the targets agreed with the International Monetary Fund (IMF) as part of the Extended Fund Facility (EFF) arrangement, the Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe noted.

Speaking during TV Derana’s current affairs program 360° last night (12), Dr. Nandalal Weerasinghe said a discussion in this regard is expected to take place when a team of the IMF is due to visit later this month.

The IMF team is scheduled to arrive in Sri Lanka this month to discuss the fifth review under the 48-month Extended Fund Facility.

The CBSL Governor said it is inevitable that targets need to be revised with unexpected events such as Cyclone Ditwah which caused massive destruction to the country’s infrastructure and the livelihoods of the people.

He said the annual budget which was planned before the arrival of the cyclone and other elements need to be considered before agreeing on the targets during the upcoming review under the EFF programme.

The Governor of the CBSL Dr. Nandalal Weerasinghe stated:

“Whenever we work with the International Monetary Fund under its programs, actions are always based on the country’s situation at the time discussions take place. Future developments are projected, and policies and targets are set accordingly. Therefore, if there is any change in circumstances, the targets must inevitably change. This is a principle accepted by both sides.

Accordingly, although this was an unexpected development, the intention was to complete the fifth review by December 15, as originally planned. However, due to this cyclone, the government proposed that instead of the previously planned budget, there should be additional budgetary expenditure relevant to the coming year, and that the targets need to be revised. As a result, it was necessary to postpone the review. Time is required to assess these impacts.

A full review must be carried out before setting targets beyond next year. To obtain the necessary time for this, the review was deferred and the rapid facility known as the RFI was considered appropriate in this context. We did not receive this in 2020 during COVID, because we did not have debt sustainability at that time.

At present, since debt sustainability has been restored, there is no need to enter into new debt agreements or prolonged procedures. Within about two weeks, we can obtain the relevant funds, in addition to other facilities.”

Central Bank Governor Dr. Nandalal Weerasinghe clarified that steps were taken to postpone the fifth review until an assessment is carried out on the economic impact caused by the cyclone and subsequent actions are determined.

He also noted that by the end of this year, Sri Lanka’s official foreign reserves are expected to reach close to US$ 8 billion.