Sri Lanka is negotiating with the IMF (International Monetary Fund) to bail its economy out of crisis, with an EFF (Extended Fund Facility).
Key highlights
- The Sri Lankan government is also looking to restructure its piling external debt with the IMF-backed programme.
- The objectives of the new IMF-supported program would be to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.
What is EFF (Extended Fund Facility)?
- The EFF was established to provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.
- An EFF provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period.
- When a country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address, the IMF can assist through an Extended Fund Facility (EFF).
- Compared to assistance provided under the Stand-by Arrangement, assistance under an extended arrangement features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period.
- Extended arrangements are typically approved for periods of three years, but may be approved for periods as long as 4 years to implement deep and sustained structural reforms.
- Amounts drawn under an EFF are to be repaid over 4½–10 years in 12 equal semiannual installments. By contrast, credits under a Stand-By Arrangement (SBA) are repaid over 3¼–5 years.
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