Cablegate: Sri Lanka: Maximum Possible Imf Assistance Needed

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

1. This is an action request, please see paragraphs 4 and 5.

2. The IMF is in the midst of finalizing a large-scale
Poverty Reduction and Growth Facility (PRGF) for the
government of Sri Lanka (GSL). Post understands the fund is
proposing a SDR 372 million (USD $510 million) package,
which equates to 90% of Sri Lanka's quota. The 90% of quota
breaks down into 65% concessional PRGF funding and 25% on an
Extended Financial Facility (EFF) basis.

3. Minster of Economic Reform Milinda Moragoda asked the
Ambassador on February 2 for US assistance in expanding the
size of the PRGF and raising the proportion of concessional
funding. Specifically, GSL is looking for the PRGF to be
100% of its quota, which totals SDR 413 million (about USD
$566 million). GSL would also like the proportion of
concessional PRGF financing in the facility, currently only
65% of quota, to be as high as possible. Moragoda said GSL
was approaching the Japanese with the same request for
assistance on the PRGF.

4. Action Request: Post sees merit in the GSL request and
asks the Department and concerned Washington agencies to
conduct the earliest possible review of the US position on
the proposed IMF package for Sri Lanka. The PRGF will be
one of the main items of support offered at the June Tokyo
donor conference on Sri Lanka, at which the Deputy Secretary
has indicated he will be present. We need the maximum
possible PRGF to support the economic growth that will be
critical to forging a lasting peace in Sri Lanka. Post
understands the 65% figure for the level of concessional
funding is a "norm" that is exceeded in special cases. Sri
Lanka's working toward peace after two decades of war ought
to qualify as a special case.

5. Action Request, cont.: Post understands the IMF will be
finalizing this week the terms of the PRGF that will be
brought before the IMF board later in the month. An
intervention this week, before February 7, will therefore be
necessary if the US is to influence the size and shape of
the facility.


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