Mumbai: The International Monetary Fund has approved an extended fund facility of $2.9 billion to Sri Lanka and $1.1 billion to Pakistan.
IMF staff and the Sri Lankan authorities have reached a staff-level agreement to support Sri Lanka's economic policies with a 48-month arrangement under the extended fund facility (EFF) of about $2.9 billion, it said.
The decision came after an IMF mission led by Peter Breuer and Masahiro Nozaki visited Colombo from August 24 to September 1, 2022.
The objectives of Sri Lanka’s new fund-supported programme are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.
“Sri Lanka has been facing an acute crisis. Vulnerabilities have grown owing to inadequate external buffers and an unsustainable public debt dynamic. The April debt moratorium led to Sri Lanka defaulting on its external obligations, and a critically low level of foreign reserves has hampered the import of essential goods, including fuel, further impeding economic activity. The economy is expected to contract by 8.7 percent in 2022 and inflation recently exceeded 60 percent. The impact has been disproportionately borne by the poor and vulnerable,” the IMF said.
Similarly, the IMF's executive board has allowed for an immediate disbursement of about $1.1 billion to Pakistan, bringing total purchases for budget support under the extended arrangement of EFF to about $3.9 billion.
The authorities have taken important measures to address Pakistan's worsened fiscal and external positions resulting from accommodative policies in FY22, the IMF said.
