Sri Lanka agrees to $2.5bn IMF loan

Sri Lanka has agreed to a $2.5bn (£1.5bn) loan accord from the International Monetary Fund (IMF) to help it weather the global economic crisis.

The agreement will now go the IMF board for final approval.

Reports suggest that an initial $313m will be made available immediately once the loan is approved.

The Sri Lankan government has said that the money will also be used to pay for post-war reconstruction work in the north and east of the island.

‘Rebuilding reserves’

The end of the country’s civil war represented a unique opportunity to undertake economic reforms, the IMF said.

“The government has formulated an ambitious programme aimed at restoring fiscal and external viability and addressing the significant reconstruction needs of the conflict-affected areas,” it added.

The country has been hit by slowing tea and textile exports that have depleted the country’s foreign currency reserves.

This is one area the programme will address.

“The IMF staff support this programme, specifically the government’s goals of rebuilding reserves, reducing the fiscal deficit to a sustainable level and strengthening the financial sector,” said the IMF.

Sri Lanka has been in discussions with the IMF regarding a loan for many months, with the government originally refusing to accept conditions laid down by the fund.

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