Sri Lanka will eagerly be awaiting the outcome of Monday’s meeting of the International Monetary Fund, as they look to be granted a desperately needed $800 million tranche of a recently suspended $2.6 billion loan.
If the final instalment of the loan is granted, the payment will be given out at a rate of 3.1% interest as opposed to the 1% of the previous tranches, and will be paid in two $400 million instalments.
Prof Sirimal Abeyratne, economist from the University of Colombo told the Sunday Times,
"There is no doubt we need this money to restore public confidence. Interest rates have risen, the balance of payments is weak and constant foreign exchange volatility reflects a lack of public confidence."
Commenting that correct economic policies would not lead to borrowing from the IMF Abeyratne also stated,
"Unfortunately this is not the case in Sri Lanka and we don't have a choice but to seek external support and when that happens, it comes with conditions."
On Saturday, Sri Lanka announced a wave of new tax increases, hoping to raise as much as 3 billion rupees, as the country attempts to deal with it's emerging economic crisis.
See our earlier posts:
Sri Lanka’s emerging economic crisis (18 Mar 2012)
Prices rise as Mahinda Economics unwinds (16 Feb 2012)
Mahinda Economics (21 Sep 2011)
