Sri Lanka says latest bailout funds can be used for fiscal support

 

Sri Lanka’s bailout by the International Monetary Fund will help the bankrupt nation lower its borrowing costs, thanks in part to a change in how the cash can be used, central bank Governor Nandalal Weerasinghe said.

The Washington-based lender for the first time will allow Sri Lanka to use funds from the $3 billion bailout to cover government spending, Weerasinghe said in an interview with Bloomberg late Tuesday in the capital Colombo.

“That will ease the government borrowing requirement from domestic markets,” Weerasinghe said.Domestic bonds due July 2033 were steady on Tuesday after the IMF announced a 48-month program for the country.

The multilateral lender has recommended the Central Bank of Sri Lanka should stand ready to further adjust its stance over the coming monetary policy meetings. Earlier this month Sri Lanka raised its benchmark rate by 100 basis points to 16.