SL does not need IMF money

[K.Haputantri]

SL does not need IMF money

January 31, 2012 10:57 pm
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Sri Lanka said Tuesday it did not need the final tranche of a $2.6-billion IMF bailout thanks to the country’s healthy foreign exchange reserves.



The loan was granted in 2009 by the International Monetary Fund just after the end of the country’s bloody ethnic civil war.



“The need is no longer there. Our (foreign currency) reserves are at fairly comfortable levels,” Central Bank of Sri Lanka governor Nivard Cabraal said.



Sri Lanka had already informed the IMF that it did not need the remainder of the money, he added.

The Indian Ocean island has drawn $1.8 billion of the package, receiving the most recent payment last April when the IMF released $218.3 million.



Sri Lanka negotiated the loan from the IMF during the height of fighting and received the cash two months after the conflict with Tamil separatist rebels ended in May 2009.



The island’s foreign reserves had dropped to a dangerously low level of $1 billion towards the end of the fighting that claimed up to 100,000 lives over nearly four decades.



Sri Lanka used the IMF loan to boost the country’s foreign currency reserves, the central bank said.

Sri Lanka’s reserves stood at $6 billion by the end of 2011, down from a record $8.1 billion recorded in July 2011.



The bank has spent more than $2 billion in recent months to buttress the Sri Lankan rupee against the dollar.



Cabraal said the interest rate to repay the entire IMF loan would also be too costly for Sri Lanka.

“We pay only 1.1 percent interest for the whole loan if we don’t draw down the balance. If we take the balance, we have to pay around 3.1 percent for the entire loan. That’s not economical,” he said. (AFP)

[aj]

But as I've read government has taken loans from private banks at 6-7% interest. So isn't 3% better than that?

[greedy]

When the loan amount drawn exceed 300% of quota only, an additional 2% surcharge needs to be paid on the loan amount exceeding 300% quota not on entire loan.

The governor was wrong/telling a lie to mention that .....“We pay only 1.1 percent interest for the whole loan if we don’t draw down the balance. If we take the balance, we have to pay around 3.1 percent for the entire loan. That’s not economical,” he said.

This correction came on FT....

“The IMF approved a Stand-By Arrangement facility (SBA) of SDR 1.65 billion (equivalent to US dollars 2.6 billion) in 2009, which is equivalent to 400% of the country’s current quota with the IMF. So far, Sri Lanka has received seven tranches amounting to US dollars 1.7 billion under the SBA and this is still lower than 300% of the quota. The applicable interest rate for the loan is SDR rate (SDR rate is calculated every week and published on IMF website, which is currently 0.1%) plus a fixed margin of 1% p.a. for disbursements up to 300% of the quota. Therefore, the interest charge for the present outstanding of US dollars 1.7 billion is 1.1% p.a. However, if the disbursements exceed 300% of the quota, a surcharge of 2% will be added on top of the present interest rate for the credit outstanding above 300%.”

http://www.ft.lk/2012/01/31/conspicuous-correction-by-cb/

[sapumal]

This CB governor is the worst CB governor.
Why the hell he is not taking this loan ? Get the loan and print local money to reduce reduce the illiquid problems on rupee. Banks are short with rupee. Interest rates can increased if didn't take this loan. At least he can borrow Sri Lankan firms and earn 4% from that taking 1% gain. If so it will reduce pressure on interest rates
He neither adjust rupee according to trade deficit or print money to reduce the illiquidity.

[worthiness]

Unfortunately, disclosure of facts to public pertaining to economy of the country lacks the clarity. Authorities should focus its attention to pass the information to public in transparent & credible manner minimizing the political advantages. People can be fooled some of the time but not all time.
Human makes mistakes unintentionally that should be corrected swiftly but onal mistakes done for petty advantage are not pardonable.
Let all types of top guys count from 1 to 10 before they open mouth.

[cseguide]

IMF has granted the loan. will government accept it. I think they will.