IMF benign on GoSL debt Gives Rs 863.08B discount Net Debt Target by 2020 Inflated

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By 2018-01-14

By Paneetha Ameresekere

The IMF has uplifted its accommodation of Government of Sri Lanka's (GoSL's) net debt goals from 68.2 per cent of GDP, to 74.8 per cent of GDP by 2020, giving GoSL a discount of 6.6 per cent of GDP or Rs 863,082 million by revising GoSL's net debt targets to the Government's own advantage.

The IMF's Mission Chief to Sri Lanka Jae Woo Lee said the discount was to accommodate Sri Lanka's interest costs and variable exchange rates.

Jae also said, what the IMF was concerned was Sri Lanka achieving a budget deficit target of 3.5 per cent of GDP by 2020 which was on track, coupled with it making a primary surplus, which goal Sri Lanka has already achieved.

When Sri Lanka entered into a three year US$ 1.5 billion (Rs 230.7 billion) arrangement with the IMF in June 2016, the agreement was that Sri Lanka by 2020 would have had reduced their net debt portfolio to 68.2 per cent of GDP (Rs 8,918,514 million) by then.

However, the current target, as per an IMF document which was made public on Friday has been uplifted to 74.8 per cent of GDP (Rs 9,781,596 million).

This target of 68.2 per cent of GDP, in August 2017, was also enlarged to 72 per cent of GDP (Rs 9,415,440 million) then, before enhancing it further to 74.8 per cent of GDP (Rs 9,781,596 million) on Friday.

But in 2016 when Sri Lanka entered into the current IMF arrangement known as an 'extended fund facility' (EFF), the island's net debt then was equivalent to 80.1 per cent of GDP (Rs 10,474,677 million), according to the IMF. It has since increased to 81.6 per cent of GDP (Rs 10,670,832 million) by last year (2017), IMF data further showed.

In respect of the IMF's EFF with the GoSL entered into in June 2016, which disbursements are to be made in a total of seven tranches spread over three years provided Sri Lanka reaches certain fiscal goals set forth by the IMF, the IMF thus far has disbursed four of those seven tranches totaling US$ 759.9 million (Rs 116,872.62 million), with the last of such disbursements, an amount of $ 251.4 million (Rs 38,665.32 million) having had been made last month. Such disbursements are made direct to the Central Bank of Sri Lanka and not to the GoSL in order to strengthen the country's foreign reserves. The EFF expires in June next year (2019).

Estimates are based on Sri Lanka's envisaged GDP value as at last year which is computed at Rs 13,077,000 million.

Conversions are based on the closing value of the middle rate of the benchmark 'spot' as at Friday which was Rs 153.80 to the US dollar.

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