IMF Board approves USD 2.6 billion loan for Sri Lanka

IMF Board approves USD 2.6 billion loan for Sri Lanka Washington, PTI: Saturday, July 25, 2009 -->
The International Monetary Fund (IMF) approved a financial assistance of USD 2.6 billion to Sri Lanka to support the country's economic reform programme and its ''much needed post-conflict reconstruction and relief efforts''.

The Executive Board of the IMF has approved the fund of which the first installment of USD 322.2 million will be made available immediately. The remaining amount will be phased in, subject to quarterly reviews.

This is the first major financial aid to Sri Lanka after the end of the more than three-decade-old civil war in the island's north which resulted in the defeat of LTTE rebels.

Key objectives of Colombo's economic reform programme supported by the fund are "to strengthen the country's fiscal position while ensuring the availability of resources for much needed post-conflict reconstruction and relief efforts," the IMF said in a press release.

The programme is intended to rebuild international reserves and strengthen Sri Lanka's domestic financial system. It also aims to lay a strong macroeconomic foundation that will help the authorities approach the broader international community for support in post-conflict reconstruction.

Following the Executive Board discussion on Sri Lanka, Takatoshi Kato, Deputy Managing Director and Acting Chairman, said the global financial crisis has had a significant impact on Sri Lanka's economy.

"The government's ambitious program, supported by the IMF, intends to restore fiscal and external viability and address the significant reconstruction needs of the conflict-affected areas, thereby laying the basis for future higher economic growth," he said.

Britain cited concern about the humanitarian situation in the refugee camps, according to a British government document. "Our objectives for Sri Lanka remain to work to secure long-term peace and prosperity for the country through reconciliation between Sri Lanka's communities -- Sinhalese, Tamils, Muslims and others -- and a fully inclusive political settlement."

France cited human-rights concerns and a lack of confidence that Sri Lanka would carry out needed overhauls, IMF officials said.