April 18, 2024
  • Facing its worst economic crisis since independence, financing assurances from creditors is critical for Sri Lanka to get the $2.9 billion loan from IMF to put its economy on track.
  • It is facing multiple challenges such as shortage of dollars, runaway inflation and a steep recession.
  • India, Japan, and China are Sri Lanka’s three largest bilateral lenders.

About International Monetary Fund (IMF)

  • IMF was established (in 1944) to provide emergency financing to countries hit by crises and help them to stabilize their economies.
  • Unlike development banks, IMF does not lend for specific projects. It also provides precautionary financing to help prevent crises
  • Crises can occur due to domestic or/and external factors and can take many different forms such as Balance of Payment issue, illiquid or insolvent financial institutions, excessive deficits and debt etc.
  • Lending instruments of IMF include
    • General Resources Account on non-concessional terms (market-based interest rates).
    • Concessional financial support (currently at zero interest rates) through Poverty Reduction and Growth Trust, which is better tailored to needs of low-income countries.
    • Resilience and Sustainability Trust to help low-income and vulnerable middle-income countries.
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