IMF Executive Board Approves $3 Billion Under the New Extended Fund Facility Arrangement for Sri Lanka
Posted on 03/22/2023
Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis. The economy is facing significant challenges stemming from pre-existing vulnerabilities and policy missteps in the lead up to the crisis, further aggravated by a series of external shocks.
On March 20, 2023, the Executive Board of the International Monetary Fund (IMF) approved a 48‑month extended arrangement under the Extended Fund Facility (EFF) with an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion). The IMF deal was first proposed in September 2022. The deal was only able to gain approval after China dropped its resistance to a planned restructuring in March 2023.
The EFF-supported program aims to restore Sri Lanka’s macroeconomic stability and debt sustainability. The Executive Board’s decision will enable an immediate disbursement equivalent to SDR 254 million (about US$ 333 million) and catalyze financial support from other development partners.
Following the Executive Board discussion on Sri Lanka, Kristalina Georgieva, Managing Director, issued the following statement: “Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities. Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.”
China is Sri Lanka’s main bilateral lender. Sri Lanka President Ranil Wickremesinghe has requested China and its other creditors to reach a compromise on its debt restructuring.