The International Monetary Fund (IMF) has agreed to consider a request by Minister of Finance M.U.M. Ali Sabry (President’s Counsel) for a Rapid Financing Instrument (RFI), following representations made by India’s Minister for Finance and Corporate Affairs Nirmala Sitharaman on behalf of Sri Lanka, despite it being outside of the standard circumstances for the issuance of a RFI.
Both Finance Ministers held discussions with IMF Managing Director (MD) Kristalina Georgieva yesterday (19).
In a Tweet issued yesterday, Advisor to the Finance Minister Shamir Zavahir said that although Sabry had made a request for a RFI to mitigate the current supply chain issues, the IMF was initially of the view that it does not meet their criteria.
“However, India subsequently made representations on a RFI for Sri Lanka as well, and the IMF may consider this request due to the unique circumstances,” he added.
Meanwhile, in a press release issued yesterday, the Indian Finance Ministry said that during the meeting between Indian Minister for Finance and Corporate Affairs Nirmala Sitharaman and Georgieva on 18 April, Sitharaman had indicated that the IMF should support and urgently provide financial assistance to Sri Lanka.
“Georgieva particularly brought reference to the help India is providing to Sri Lanka during their difficult economic crisis and assured Sitharaman that the IMF would continue to actively engage with Sri Lanka.”
A statement by the Finance Ministry said that after Ali Sabry had made a request for a RFI, the IMF had informed Ali Sabry that India had also made representations on behalf of Sri Lanka about a RFI. The IMF had further informed Ali Sabry that they would consider the request, despite it being outside of the standard circumstances for the issuance of a RFI. The RFI provides rapid support for all member countries facing an urgent balance of payments related need and can be used in a wide range of circumstances.
Furthermore, Zavahir said that the negotiations with the IMF had started on a “positive note.”
“They see the recent steps taken to increase the interest rates, and calling for Requests for Proposals (RFPs) for the appointment of international financial and legal advisors, as good first steps towards a possible restructuring programme. In any event, the IMF appears to be positive towards granting an Extended Fund Facility (EFF). Ideally if this can be expedited, it can help stabilise things in the short term till long term solutions kick in,” he noted.
Minister Sabry is due to hold discussions throughout the week with other IMF officials and the World Bank.