‘With IMF approval Lanka’s Reserves will rise to USD 4 Bn’ | Daily News

‘With IMF approval Lanka’s Reserves will rise to USD 4 Bn’

Inflation to remain at 4 to 6% by early 2025
Estimates - Year end Gross Official Reserves and Usable Gross Official Reserves
Estimates - Year end Gross Official Reserves and Usable Gross Official Reserves

With the IMF approval on Sri Lanka, the country’s Gross official reserves are expected to rise to USD 4 billion in 2023 and to USD 11 billion by 2025 say NDB Securities in their Sri Lanka’s IMF EFF report.

“The central bank expects to rebuild reserves via fx purchases from the marGOR)ket (USD 1.4 billion on a net basis in 2023), non interest current account surplus and new external financing.”

Subsequent to the IMF’s Board approving Sri Lanka’s USD 3 billion, 48-month Extended Fund Facility (EFF) Program on 20th March 2023, Sri Lanka would be able to secure around USD 14 billion in total debt relief during the program period.

“The IMF highlights that their debt restructuring scenario is purely for illustrative purposes, and the final design of debt restructuring will be decided depending on the negotiations between the government and creditors.”

The report also says that they expect Multilateral Development Banks to provide USD 3.7 billion during the program period for budget support and World Bank (WB) is to provide USD 1.7 billion and Asian Development Board (ADB) USD 2.0 Bn. In 2023, WB will provide USD 250 million and ADB $ 650 million for budget financing.

The report also states that during 2022 to2027, Sri Lanka’s external financing gap of USD 25.2 billion will be funded by; IMF EFF 12%, MDBs (Multilateral Development Banks such as ADB and World Bank) 15% and 56% via debt reliefs.

The report said that the government is to announce their plans on external debt and domestic debt operations before the end-April 2023. “it is expected that a select pool of the remaining domestic debt will be re-profiled to reduce GFN, (Global Financial Network) while limiting the impact on the financial sector.

It is also forecast that Annual average inflation will remain at 29% in 2023 and to fall to a single digit level from there onwards. “Headline inflation is expected to be at the CBSL’s target band of 4-6% by early 2025.”

“Budget deficit too will come down to 5.0% of GDP in 2025 from 10.4% in 2022.”

GDP is also expected to contract by 3.0% in 2023 before recovering in 2024. The government intends to lift import restrictions gradually.

 


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