Sri Lanka IMF talks stretch to second week

Mar 30, 2009 (LBO) – The Sri Lanka rupee closed at 115.20/45 against the greenback, with the country’s reserves running low as talks with the International Monetary Fund for a bailout package, stretched to a second week. The Sri Lanka rupee broke the Central Bank’s defended peg level of 114.25 last Thursday.

The IMF team began talks with authorities on March 23, and was expected to wrap up talks in the same week to reach a ‘staff level agreement’ and the first tranche was expected in the first or second week of April following board approval.

However the team is still in the country, and is expected to remain at least till the middle of the week. An IMF spokesperson last week declined to put a deadline for a successful conclusion of talks.

Analysts are now hoping that a deal would be approved at least by May.

Sri Lanka’s reserves are running low with the monetary authority spending 240 million US dollars to defend a peg in February and close to 200 million US dollars in March.

While gross reserves had fallen to 1,415 million by end January 2009, net reserves were about 1,151 million US dollars. With every passing month, Sri Lanka has been losing about 200 to 250 million US dollars in reserves.