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(Bloomberg) -- The International Monetary Fund approved an extension to Sri Lanka’s lending arrangement, providing a cushion to the island nation’s economy as it recovers from last month’s terrorist attacks.
Authorities also agreed a $164 million disbursement from the $1.5 billion facility, which was extended by a year to June 2020, the IMF said in a statement. About $1.2 billion has now been released under the aid program.
The extension provides Sri Lanka’s government more time to anchor macroeconomic stability and see through economic reforms, following last year’s political crisis and a deadly terror attack in April that threatens the nation’s tourism industry.
In March, Sri Lanka secured a staff-level agreement to extend its lending facility for an additional year, helping the nation obtain favorable borrowing terms as it tapped the international markets for a $2.4 billion bond sale to meet debt obligations in 2019.
“We join executive directors in extending our condolences to the government and people of Sri Lanka for the loss of life and suffering caused by the recent terror attacks,” the IMF said in the statement. “Sustaining policy discipline remains critical to strengthen resilience, given still sizable public debt and low external buffers, and support strong and inclusive growth.”
Manuela Goretti, IMF’s mission chief for Sri Lanka, said last month that local authorities needed to take “decisive policy and security measures” in the wake of the attacks, especially to secure the tourism industry that makes up 5 percent of the economy.
Sri Lanka approved a debt moratorium and lower value-added tax for the tourism sector to help it face a drop in arrivals following the attacks on three luxury hotels and three churches in which more than 250 people were killed.
The central bank has also asked financial institutions to reduce interest rates on deposits to help enhance credit flows to the economy.
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