US embassy cable - 03COLOMBO195

UNCLAS COLOMBO 000195 
 
SIPDIS 
 
STATE FOR SA, EB, AND D 
STATE PASS USTR 
 
E.O. 12958: N/A 
TAGS: EFIN, EAID, PREL, CE 
SUBJECT: SRI LANKA: MAXIMUM POSSIBLE IMF ASSISTANCE NEEDED 
TO SUPPORT PEACE 
 
 
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. 
 
Wills