Lanka reaches an agreement of for 1.5 billion dollars with IMF to bolster finances

Sri Lanka has reached an agreement with the International Monetary Fund for 1.5 billion dollars in loans to help lower its borrowing costs and fix its finances, aimed at reversing a two-decade decline in tax revenue and reviving growth.

The International Monetary Fund's Chief for Sri Lanka, Todd Schneider, said a staff-level agreement was reached to release 1.5 billion dollars over a three-year period in support of the island's reform agenda, reports Lanka Page.

Todd Schneider, IMF mission chief for Sri Lanka, announced that following discussions held between IMF staff and the Sri Lankan authorities during the 2016 Spring Meetings in Washington, a staff-level agreement was reached on a three-year program to be supported by the IMF's Extended Fund Facility (EFF).

The agreement will be subject to completion of prior actions and approval by the IMF's Executive Board, which is expected to consider Sri Lanka's request in early June.

The IMF said the Sri Lankan government will seek to raise its tax-to-GDP ratio to 15 per cent by 2020 from the current level of 11 per cent.

An EFF is designed to help countries resolve serious balance of payment problems brought on by structural weaknesses in the economy.

In 2009, Sri Lanka received 2.6 billion dollars from the IMF to boost its financial reserves, which dropped below 1 billion dollars at the height of fighting between Tamil Tiger rebels and troops.

Sri Lanka enjoyed a blistering economic growth rate averaging more than 8.0 per cent for two years after a prolonged civil war ended in 2009.