Economy

IMF increases bailout access to 600-pct from 200-pct of member quota

Tuesday March 12, 2024 6:22 am

ECONOMYNEXT – The International Monetary Fund has increased normal access to its funds to 600 percent of the quota for member countries from the current 200 percent for at least 12 months amid global economic turmoil.

Many countries are experiencing currency trouble of external default after a spurious economic doctrines over the past decade, while floating rate nations are experiencing fiscal trouble as inflationary policy is scaled back.

“The increase was initially approved in March 2023 for a period of 12 months, ending on March 5, 2024,” the IMF said in a statement.

“The extension takes place in the context of the still uncertain global economic environment, and the need for a smooth transition to the comprehensive review of the GRA access limits planned for the second half of 2024.”

IMF Executive Board Extends Temporary Increase in Access Limits Under the General Resources Account

The full statement is reproduced below

Washington, DC – March 11, 2024: The Executive Board of the International Monetary Fund (IMF) approved on March 4, 2024 an extension until end of 2024 of the temporary increase in normal limits on members’ annual and cumulative access to Fund resources in the General Resources Account (GRA) to 200 and 600 percent of quota respectively.

The increase was initially approved in March 2023 for a period of 12 months, ending on March 5, 2024. The extension takes place in the context of the still uncertain global economic environment, and the need for a smooth transition to the comprehensive review of the GRA access limits planned for the second half of 2024.

IMF lending to members is subject to both normal annual and cumulative limits on access to the Fund’s general resources. Access to resources beyond these limits is subject to meeting the requirements of the Fund’s exceptional access framework. The last comprehensive review of access limits in the Fund’s GRA happened in 2016, establishing an annual limit of 145 percent and a cumulative limit of 435 percent of quota.

The decision to temporarily raise GRA limits in March 2023 reflected the challenging economic environment and uncertain prospects faced by emerging markets and developing economies. The Board noted at the time that an extension of the temporary increase could be appropriate, if circumstances warranted, and should be considered before the expiration of the 12-month period.

The extension will allow member countries facing large shocks and increased financing pressures in an uncertain environment to access higher levels of financial support in the GRA without triggering the exceptional access framework. It will also avoid a possible fluctuation in GRA normal access limits between March 2024 and the comprehensive review of GRA access limits planned for later this year, ensuring more predictability in the Fund’s lending toolkit.

The forthcoming comprehensive review of access limits, expected to be completed in the second half of 2024, will reassess the adequacy of access limits in light of their erosion against key metrics, taking into account the outcomes of the 16th General Review of Quotas and other factors, including the need to safeguard Fund resources.

Executive Board Assessment[1]

Executive Directors supported the staff proposal to extend until end‑2024 the temporary increase in the annual and cumulative limits on overall access to Fund resources in the General Resources Account (GRA). The annual access limit in the GRA will continue to be set at 200 percent of a member’s quota and the cumulative access limit at 600 percent of quota. Directors noted that since the GRA access limits were increased in March 2023, the economic recovery has continued and inflation has receded in some countries, but the global outlook remains weak and uncertain, with risks especially elevated for vulnerable emerging market economies.

Directors stressed that access limits are key elements of the Fund’s risk management framework, providing an important safeguard to Fund resources. Increased access limits should not automatically imply higher access for a member. Access would continue to be determined by rigorous assessments informed by standard access policy criteria, including the size of the balance of payments need, the strength of program policies, the country’s record of using Fund resources, debt sustainability, and capacity to repay the Fund, as well as the catalytic role of Fund financing. Directors also emphasized the importance of enhanced scrutiny and additional safeguards for exceptional access cases.

Most Directors considered that maintaining the higher limits through end‑2024 would help avoid large swings in SDR nominal values of access limits in the context of their erosion against key metrics, pending the comprehensive review of access limits in the second half of the year. Directors noted that the impact of the proposed extension of higher access limits on the Fund’s liquidity and on the demand for Fund resources is expected to be limited, although subject to uncertainty. In this context, they recommended close monitoring of liquidity and credit developments and the impact on the Fund’s precautionary balances. Directors concurred with the proposed transitional rules for exceptional access and for the High Combined GRA and PRGT (Poverty Reduction and Growth Trust) credit exposure policy safeguards (PS‑HCC) in case access limits, and hence the PS‑HCC thresholds, were to revert to lower levels after 2024.

Directors looked forward to the comprehensive review of access limits planned for late‑2024, which will consider the GRA access limits and other access‑related policies in the context of the 16th General Review of Quotas. The comprehensive review will evaluate developments with respect to access limits vis‑à‑vis relevant macroeconomic aggregates. In this context, a few Directors cautioned that the Fund’s risk tolerance should not be tightening when some members face significant challenges. A few other Directors did not share the view that the Fund’s risk tolerance has implicitly or de facto tightened, but has instead loosened, and emphasized that normal access limits should be set in a manner that appropriately safeguards Fund resources. Directors emphasized that the review should be holistic and take into account a broad range of considerations. They stressed that today’s decision should not prejudge the outcome of the review.

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Weather and Climate

Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

Monday June 3, 2024 2:17 pm

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

Politics

UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

Monday June 3, 2024 1:59 pm

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

Accidents

300 of 100,000 trees in Colombo considered high risk: state minister

Monday June 3, 2024 1:05 pm

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)