Sri Lanka standby loan still not ready for board approval: IMF official

Sri Lanka standby loan still not ready for board approval: IMF official[ LBO ] - [ Jun 20, 2009 03:12 GMT ]
June 20, 2009- An International Monetary Fund loan for Sri Lanka is still not ready for approval for its executive board, an official said, though the country is rapidly emerging from a balance of payments crisis.
IMF spokesperson Caroline Atkinson said Friday "whenever there is final agreement, then a program would go to the Executive Board."
Last month Atkinson said she expected the loan of at least 1.9 billion US dollars to be approved within "weeks".
The loan had been delayed as it awaited approval from the US Treasury, which also consults other agencies, including the State Department, which is yet to approve the loan.
The US executive director votes on the loan after receiving a report from the international monetary affairs office of the Treasury. The US has to biggest share of votes in the IMF.
In March Sri Lanka floated the rupee as a prior action to the loan and the country's balance of payments has since turned.
Balance of payments crises are caused when a central bank sells foreign exchange to keep an exchange rate peg and prints domestic money at the same time, undermining the same objective.
The vicious cycle can rapidly deplete foreign reserves backing the local currency issue. Net foreign assets of Sri Lanka's central bank fell from about 3.0 billion dollars to 830 million US dollars during the peg defence period.