Sri Lanka expects to reach IMF staff level agreement for loan soon

COLOMBO: Sri Lanka is expected to reach a staff level agreement with the International Monetary Fund (IMF) for a loan as early as this week, the central bank deputy governor said on Tuesday.

"On the technical level we have come to an agreement on the fiscal and monetary reforms. Hopefully we should be able to finalise it within if not a couple of days, probably within this week," Nandalal Weerasinghe told reporters in Colombo.

"I can't say exactly the date. But we are very close to reaching an agreement."

Sri Lanka is seeking a $1.5-billion loan from the IMF to tide over its finances. The global lender on April 11 said it expected to complete negotiations with Sri Lanka for a three-year loan programme within two weeks.

During the loan negotiation, the $82 billion economy has raised its value added tax by 4 percent, decided to stop excess government borrowing to get out of a debt trap, and stopped tax holidays given by the state-run Board of Investment to fix its finance.

IMF spokesperson Jennifer Beckman said the global lender does not have anything further to add to the statement issued on April 11. "Talks are still ongoing." Beckman told Reuters via email.

The IMF has urged Sri Lanka to reduce its fiscal deficit, raise government revenue and improve foreign exchange reserves, which were at $6.2 billion at end-March, down by nearly a third from October 2014 when they touched a record high.

The central bank on Tuesday kept its key policy rates steady, but its Governor, Arjuna Mahendran, said the current monetary policy was not too tight and the country was "probably still at fairly accommodative monetary policy context."

The latest central bank data released late on Tuesday showed the island nation's 2015 budget deficit was 7.4 percent of the gross domestic product (GDP), much higher than the original estimation of 4.4 percent and rising from 5.7 percent in 2014.

Sri Lanka aims at a 5.4 percent budget deficit goal and a 5.8 percent economic growth target in 2016 from the last year's 4.8 percent.