Sri Lanka’s second tranche of a $3 billion loan from the International Monetary Fund is likely to be delayed as the island nation has failed to meet the programme objective and a global lender’s official said there is no fixed timeline on the disbursement of second tranche.
Sri Lanka’s government revenue is likely to face a 15 percent fall from the target agreed with the IMF, the global lender said, amid poor tax administration and lower collection.
An IMF delegation was in Colombo over a week for the first review of the loan before the global lender’s Executive Board approval for the second tranche.
“There is no fixed timeline,” Peter Breuer, Senior Mission Chief for Sri Lanka at the IMF’s Asia and Pacific Department, told reporters at a media briefing on Wednesday after concluding the first review of the loan.
“We are confident that it will be able to do with a little bit more time,” he said referring to Sri Lanka’s effort to raise revenue.
The IMF in March this year approved a 48-month, $3 billion extended arrangement under the Extended Fund Facility (EFF) to support Sri Lanka’s economic policies and reforms with the main emphasis on increasing the government revenue, boosting the international reserves, and reducing inflation.
Soon after the approval, the island nation which is going through an unprecedented economic crisis received the first tranche of $330 million. The first review is to assess the country’s performance against the IMF programme objective.
Breuer said Sri Lanka is yet to satisfy two key objectives.
“We need two important things to be satisfied. We need to reach agreement on set targets, policies, and reforms that will allow us to go forward… with the understanding that the objective of the programme can be reached,” Breuer said.
“So, now we have discovered there was a little bit of shortfall on one area during this year. So, we are looking to try and find ways to address that shortfall and compensate.
He said working in a direction of having agreement on these policies is an “important prerequisite.”
“Then the other one is in the area of debt,” Breuer said adding that reaching agreement with creditors will help store debt sustainability in Sri Lanka.
“When these two conditions are met, we can go forward. Of course, there is a little bit of administrative process also. It will take some time to write the reports that actually assesses the performance of the first review before steps to be considered by our executive board which will make the final decision on this.”