IMF agrees $1.5 bn bailout for Sri Lanka

COLOMBO: The International Monetary Fund (IMF) said on Friday it has reached agreement with the Sri Lankan government for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.

The three-year loan will require IMF board approval in June, the global lender said, and is subject to Sri Lanka implementing reforms, including streamlining the tax code and reducing a bloated deficit.

"The Sri Lankan authorities and the IMF have reached a staff-level agreement on a 36-month Extended Fund Facility (EFF)," for a $1.5 billion loan, Todd Schneider, IMF mission chief for Sri Lanka said in a statement.

The agreement comes as debt-laden Sri Lanka faces a looming balance-of-payment crisis due to heavy foreign outflows from government securities and high external debt repayments.

Sri Lanka´s foreign exchange reserves have fallen by a third from their peak in late 2014 to $6.2 billion at end-March.

The government will seek to raise the tax-to-gross domestic product (GDP) ratio, which was 10.8 percent in 2014, to near 15 percent by 2020 through a new Inland Revenue Act, reform of the VAT and the customs code, Schneider said.

The loan - the second bailout from the IMF since 2009 – will support the government´s ambitious economic reform agenda aimed at fundamental changes to tax policy, reverse a two-decade decline in tax revenues, and put public finances on a sustainable medium-term footing, Schneider said.