Continuing political pressure from the United States and other western nations has been the cause of the long delay in the endorsement of a US$1.9 billion IMF loan to Sri Lanka but the Central Bank (CB) is not unduly worried, saying the loan is not urgently needed now.
“There was a need some months ago, but now the dollars are flowing in from other sources including migrant remittances. In the past few weeks alone,US$350 million have come in – that’s almost equivalent to the first tranche of the IMF loan (once it’s approved),” CB Governor Ajith
Nivard Cabraal said.
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CB Governor Ajith
Nivard Cabraal |
The loan request was made in April. Mr Cabraal told the Sunday Times there was a need in April/May but the CB had other options if the request failed. He did not say what the options were. On Friday, the CB’s dollar reserves were boosted when a government development bond issue was oversubscribed by twice the required amount.
The CB was offering 2-year maturity Sri Lanka Development Bonds (SLDBs) of upto US$50 million but when the bids closed on Friday, offers from foreign and local banks totalling $118 million were received. The CB said it had decided to accept $115 million from the offers.
“IMF funds are given in emergencies. It’s a lender of last resort. If it takes more than two months to get this money, then the crisis would be over by that time,” Mr Cabraal told the Sunday Times. He also discounted reports in the media that the amount would be much higher, saying the Sri Lankan application is for $1.9 billion.
Before government troops defeated the LTTE, the US and some western allies linked the approval of the loan to Sri Lanka cleaning up its act over alleged human rights violations. That position, though not explicit as a demand from the west, has not changed, according to some observers.
Mr Cabraal also agrees: “There seems to be some (political) pressure … otherwise there is no reason for the delay.”
The governor, some economists and a US Senator (who visited Colombo) have gone on record saying that IMF decisions are dictated by economic policy and not political considerations.
The CB said the new bond money would go to replenish its foreign currency reserves, part of which was used to settle foreign currency commercial loan obligation of $125 million on June 15.
“The oversubscription … compared to the last SLDB issuance in March this year and the increase in foreign investments in rupee denominated Treasury bonds and Treasury bills by Rs 22 billion (US$ 190 million) during the past 10 weeks clearly reflect the growing investor confidence in the Government of Sri Lanka after the dawn of the new era in the country, as a result of the ending of the 30-year terrorist conflict,” the CB statement said. |
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