{
  "title": "Press Release: IMF Executive Board Approves US$2.6 Billion Stand-By Arrangement for Sri Lanka",
  "publication": "IMF News, July 24, 2009",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr09266",
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  "overlayPath": "/en/news/articles/2015/09/14/01/49/pr09266/index.md",
  "summary": "The Executive Board approved a 20-month Stand-By Arrangement for Sri Lanka in an amount equivalent to SDR 1.65 billion (about US$2.6 billion).",
  "publishDate": "2009-07-24",
  "sections": [
    {
      "heading": "Approval and financing",
      "content": "- The Executive Board approved a 20-month Stand-By Arrangement for Sri Lanka in an amount equivalent to SDR 1.65 billion (about US$2.6 billion).\n- Upon approval, an amount equivalent to SDR 206.7 million (about US$322.2 million) becomes immediately available to Sri Lanka. The remaining amount will be phased in, subject to quarterly reviews.\n- The total amount of IMF resources made available under the arrangement equals 400 percent of the country’s quota.\n- Sri Lanka has a quota of SDR 413.4 million (about US$644.4 million)."
    },
    {
      "heading": "Objectives of the authorities’ economic reform program",
      "content": "- Strengthen the country’s fiscal position while ensuring resources for post-conflict reconstruction and relief efforts.\n- Rebuild international reserves and strengthen Sri Lanka’s domestic financial system.\n- Protect the most vulnerable in the country from the burden of needed economic adjustment.\n- Lay a strong macroeconomic foundation to help approach the broader international community for financial support in post-conflict reconstruction."
    },
    {
      "heading": "Executive Board statement highlights (Mr. Takatoshi Kato, Deputy Managing Director and Acting Chairman)",
      "content": "- The global financial crisis significantly impacted Sri Lanka: persistently high budget deficits led to reliance on short-term financing and a subsequent sudden stop in international capital flows.\n- Central bank intervention to prevent exchange rate depreciation, combined with a decline in demand for exports, resulted in a significant loss of international reserves; despite a recent rebound in capital inflows, reserves remain very low.\n- The IMF-supported program aims to restore fiscal and external viability and address reconstruction needs of conflict-affected areas to support future higher economic growth.\n- Reducing the central government fiscal deficit while preserving spending on health and education and protecting the most vulnerable is central to the program.\n- Authorities have put in place revenue-enhancing measures and intend to introduce reforms to reduce tax exemptions and broaden the tax base beginning in the 2010 budget.\n- Savings on military spending and possible concessional donor financing should help finance reconstruction spending needs.\n- The program aims to rebuild reserves to prudent levels while allowing exchange rate flexibility to boost export competitiveness; central bank policies will aim to control inflation while ensuring adequate credit to the private sector.\n- The government implemented a plan to recapitalize Seylan Bank and intends to develop a contingency plan for potential stresses in the financial system, and to improve regulation and supervision.\n- Mr. Kato noted that the program will require difficult reforms but presents an opportunity to ensure national reconciliation, restore macroeconomic stability, and promote durable growth."
    },
    {
      "heading": "Recent economic developments",
      "content": "- Sri Lanka was hit hard by the global economic and financial crisis; reliance on short-term financing led to a sudden stop of international capital flows.\n- Central bank efforts to defend the exchange rate led to a significant loss of reserves; despite a rebound in short-term capital inflows after the end of the conflict, reserves remain low and foreign exchange needs remain acute.\n- Economic growth outlook deteriorated: growth of around 3 percent expected in 2009 compared to 6 percent in 2008.\n- The financial sector has been put under increasing stress due to the economic slowdown.\n- The end of the conflict added policy challenges: reconstruction and humanitarian relief efforts are large undertakings, requiring significant spending priorities while maintaining debt sustainability."
    },
    {
      "heading": "Program summary — key elements",
      "content": "- Fiscal policy:\n  - Aim: reduce the central government budget deficit to 5 percent of GDP by 2011, from a target of 7 percent of GDP in 2009, in line with the Fiscal Responsibility Act.\n  - Revenue measures: broaden the tax base, reduce tax exemptions, and improve enforcement.\n  - Expenditure measures: rationalize expenditures; cuts in military and other expenditures to make room for post-conflict reconstruction and relief spendings.\n- Exchange rate and monetary policy:\n  - Strengthen international reserve position and restore external viability.\n  - Allow greater exchange rate flexibility to facilitate external adjustment and ensure export competitiveness.\n- Social protection:\n  - Protect expenditures on social transfers for the most vulnerable (with 15 percent of the population living below the poverty line and a large number displaced in the North and East).\n  - Secure spending on post-conflict humanitarian assistance through savings from spending cuts and external financing and grants from multilateral institutions and the donor community.\n- Financial system:\n  - Strengthen the banking system by improving the regulatory framework and enhancing bank supervision to build confidence in the local financial system."
    },
    {
      "heading": "Selected economic indicators (2006–2011) — key figures preserved as presented",
      "content": "- Real GDP growth:\n  - 2006: 7.7\n  - 2007: 6.8\n  - 2008: 6.0\n  - 2009 Est.: 3.0\n  - 2010 Prog.: 5.0\n  - 2011 Proj.: 6.5\n- Inflation (average):\n  - 2006: 10.0\n  - 2007: 15.8\n  - 2008: 22.6\n  - 2009 Est.: 4.6\n  - 2010 Prog.: 13.0\n  - 2011 Proj.: 9.6\n- Inflation (end-of-period):\n  - 2006: 13.5\n  - 2007: 18.7\n  - 2008: 14.4\n  - 2009 Est.: 8.0\n  - 2010 Prog.: 10.7\n  - 2011 Proj.: 8.6\n- Public finances (in percent of GDP):\n  - Revenue 2006–2011: 16.3; 14.9; 14.8; 15.4; 16.0\n  - Expenditure 1/ 2006–2010: 24.3; 23.5; 21.9; 21.5; 21.0\n  - Central government balance 1/ 2006–2011: -8.0; -7.7; -7.0; -6.0; -5.0\n  - Consolidated government balance 1/ 2006–2010: -8.2; -8.8; -6.4; -4.9\n  - Consolidated domestic financing 2006–2010: 5.6; 4.1; 7.1; 4.5; 3.6\n  - Government debt (domestic and external) 2006–2011: 88.7; 85.8; 81.1; 83.7; 84.4; 81.0\n- Money and credit (percent change, end of period):\n  - Reserve money 2006–2011: 21.2; 10.2; 1.5; 12.0; 13.8; 13.4\n  - Broad money 2006–2010: 17.8; 16.6; 8.5; 20.2; 20.8\n  - Domestic credit 2006–2011: 29.5; 18.0; 15.2; 17.3; 10.5; 17.4\n  - Private sector credit 2006–2011: 24.0; 19.3; 7.9; 10.5; 17.4; 21.4\n  - Public sector credit 2006–2011: 46.1; 8.9; 46.2; 18.2; 10.9; 9.1\n- Balance of payments (in millions of U.S. dollars):\n  - Exports 2006–2011: 6,883; 7,640; 8,137; 7,098; 7,559; 7,949\n  - Imports 2006–2011: 10,254; 11,296; 14,009; 10,015; 10,552; 11,368\n  - Current account balance 2006–2011: -1,500; -1,401; -3,719; -478; -504; -929\n  - Current account balance (in percent of GDP) 2006–2011: -5.3; -4.3; -9.4; -1.2; -1.3; -2.2\n  - Export value growth (percent): 11.0; -12.8; 5.2\n  - Import value growth (percent): 15.7; -28.5; 5.4\n- Gross official reserves (end of period) 2/:\n  - In millions of U.S. dollars 2006–2011: 2,515; 3,063; 1,580; 2,492; 4,110; 4,614\n  - In months of imports 2006–2009: 2.4; 1.6; 3.7; 4.0\n  - As a percent of short-term debt 2006–2011: 71; 60; 29; 45; 79\n- External debt (public and private):\n  - In billions of U.S. dollars 2006–2010: 14.2; 16.7; 17.6; 19.1; 19.6\n  - As a percent of GDP 2006–2010: 50.2; 51.5; 44.4; 43.5; 49.8\n  - Total stock of public dollar commercial debt 3/ 2006–2010: 1,659; 2,758; 2,658; 2,596; 2,307; 2,275\n  - As percent of gross official reserves 2006–2010: 66; 90; 168; 104; 56; 49"
    },
    {
      "heading": "Other country facts (as presented)",
      "content": "- Main exports (percent of total, 2008): garment (43), tea (16)\n- GDP per capita (2008, est.): US$1,972\n- Unemployment rate (2008): 5.4 percent\n- Poverty rate (2007, incidence): 15.2 percent\n- FDI (2008, est.): $691 million\n- Public debt (2008): 81.1 percent of GDP\n\nSource: IMF Press Release No. 09/266 (July 24, 2009).\n\n---\n\n\n References\n\n- Sri Lanka and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr09266"
    }
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    "Published: July 24, 2009",
    "The Executive Board approved a 20-month Stand-By Arrangement for Sri Lanka in an amount equivalent to SDR 1.65 billion (about US$2.6 billion).",
    "Upon approval, an amount equivalent to SDR 206.7 million (about US$322.2 million) becomes immediately available to Sri Lanka. The remaining amount will be phased in, subject to quarterly reviews.",
    "The total amount of IMF resources made available under the arrangement equals 400 percent of the country’s quota.",
    "Sri Lanka has a quota of SDR 413.4 million (about US$644.4 million).",
    "Strengthen the country’s fiscal position while ensuring resources for post-conflict reconstruction and relief efforts.",
    "Rebuild international reserves and strengthen Sri Lanka’s domestic financial system.",
    "Protect the most vulnerable in the country from the burden of needed economic adjustment.",
    "Lay a strong macroeconomic foundation to help approach the broader international community for financial support in post-conflict reconstruction.",
    "The global financial crisis significantly impacted Sri Lanka: persistently high budget deficits led to reliance on short-term financing and a subsequent sudden stop in international capital flows.",
    "Central bank intervention to prevent exchange rate depreciation, combined with a decline in demand for exports, resulted in a significant loss of international reserves; despite a recent rebound in capital inflows, reserves remain very low.",
    "The IMF-supported program aims to restore fiscal and external viability and address reconstruction needs of conflict-affected areas to support future higher economic growth.",
    "Reducing the central government fiscal deficit while preserving spending on health and education and protecting the most vulnerable is central to the program.",
    "Authorities have put in place revenue-enhancing measures and intend to introduce reforms to reduce tax exemptions and broaden the tax base beginning in the 2010 budget.",
    "Savings on military spending and possible concessional donor financing should help finance reconstruction spending needs.",
    "The program aims to rebuild reserves to prudent levels while allowing exchange rate flexibility to boost export competitiveness; central bank policies will aim to control inflation while ensuring adequate credit to the private sector.",
    "The government implemented a plan to recapitalize Seylan Bank and intends to develop a contingency plan for potential stresses in the financial system, and to improve regulation and supervision.",
    "Mr. Kato noted that the program will require difficult reforms but presents an opportunity to ensure national reconciliation, restore macroeconomic stability, and promote durable growth.",
    "Sri Lanka was hit hard by the global economic and financial crisis; reliance on short-term financing led to a sudden stop of international capital flows.",
    "Central bank efforts to defend the exchange rate led to a significant loss of reserves; despite a rebound in short-term capital inflows after the end of the conflict, reserves remain low and foreign exchange needs remain acute.",
    "Economic growth outlook deteriorated: growth of around 3 percent expected in 2009 compared to 6 percent in 2008.",
    "The financial sector has been put under increasing stress due to the economic slowdown.",
    "The end of the conflict added policy challenges: reconstruction and humanitarian relief efforts are large undertakings, requiring significant spending priorities while maintaining debt sustainability.",
    "Fiscal policy:",
    "Exchange rate and monetary policy:",
    "Social protection:",
    "Financial system:",
    "Real GDP growth:",
    "Inflation (average):",
    "Inflation (end-of-period):",
    "Public finances (in percent of GDP):",
    "Money and credit (percent change, end of period):",
    "Balance of payments (in millions of U.S. dollars):",
    "Gross official reserves (end of period) 2/:",
    "External debt (public and private):",
    "Main exports (percent of total, 2008): garment (43), tea (16)",
    "GDP per capita (2008, est.): US$1,972",
    "Unemployment rate (2008): 5.4 percent",
    "Poverty rate (2007, incidence): 15.2 percent",
    "FDI (2008, est.): $691 million",
    "Public debt (2008): 81.1 percent of GDP",
    "[Sri Lanka and the IMF](http://www.imf.org/external/country/LKA/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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