Optimize IAS
  • Home
  • About Us
  • Courses
    • Prelims Test Series
      • LAQSHYA 2026 Prelims Mentorship
    • Mains Mentorship
      • Arjuna 2026 Mains Mentorship
  • Portal Login
  • Home
  • About Us
  • Courses
    • Prelims Test Series
      • LAQSHYA 2026 Prelims Mentorship
    • Mains Mentorship
      • Arjuna 2026 Mains Mentorship
  • Portal Login

Sri-Lanka IMF Bailout and IMF review

  • August 18, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
No Comments

 

 

Sri-Lanka IMF Bailout and IMF review

Subject: International Relations

Section: International Organisation

Context:

  • IMF to conduct the first review of Sri Lanka Bailout in mid September.

More about the Sri Lankan Bailout:

  • In September 2022, the International Monetary Fund (IMF) and the Sri Lankan authorities reached a staff-level agreement to support Sri Lanka’s economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about $3 billion.
  • The objectives of Sri Lanka’s new Fund-supported program was –
    • To restore macroeconomic stability and debt sustainability,
    • Stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.

What is the International Monetary Fund:

  • The International Monetary Fund is an international organization that was established in 1944 to promote international economic cooperation, exchange rate stability and resources to member countries experiencing economic difficulties.
  • It is headquartered in Washington D.C., United States, and currently has 190 member countries.
  • It is governed by a Board of Governors, which is composed of one governor from each member country.
  • Each member country has a number of votes in the IMF based on its quota system which reflects a member’s relative size in the global economy.

How does the IMF help countries:

  • The IMF basically lends money, often in the form of special drawing rights (SDRs), to troubled economies that seek the lender’s assistance.
  • SDRs simply represent a basket of five currencies, namely theS. dollar, the euro, the Chinese yuan, the Japanese yen, and the British pound.
  • The IMF carries out its lending to troubled economies through a number of lending programs such as the extended credit facility, the flexible credit line, the stand-by agreement,
  • Countries receiving the bailout can use the SDRs for various purposes depending on their individual circumstances.

What are IMF Bailouts:

  • Bailout is a general term for extending financial support to a company/country facing a potential bankruptcy threat.
  • It can take the form of loans, cash, bonds, or stock purchases.
  • A bailout may or may not require reimbursement but is often accompanied by greater oversight and regulations.

What is Extended Fund Facility:

  • The Extended Fund Facility (EFF) is a lending facility of the Fund of the IMF and it was established in 1974.
  • The EFF provides financial assistance to countries facing serious medium-term balance of payments (BoP) problems because of structural weaknesses that require time to address.
  • To help countries implement medium-term structural reforms, the EFF offers longer program engagement and a longer repayment period.
  • All member countries of the IMF facing actual or potential external financing needs are eligible.

Has India availed the EFF in the past:

  • In 1980, India had borrowed $ 3.9 billion ,a record amount then under an extended fund facility from the IMF.
  • However, the then Government did not avail of the full amount as the economy recovered.
  • During the 1991 economic crisis, India borrowed $ 2.2 billion from the IMF under two standby arrangements, between 1991 and 1993.
  • A little over a decade later, India emerged as a creditor to the Fund as its economy recovered and its balance of payments position improved substantially.
International Relations Sri-Lanka IMF Bailout and IMF review

Recent Posts

  • Daily Prelims Notes 23 March 2025 March 23, 2025
  • Challenges in Uploading Voting Data March 23, 2025
  • Fertilizers Committee Warns Against Under-Funding of Nutrient Subsidy Schemes March 23, 2025
  • Tavasya: The Fourth Krivak-Class Stealth Frigate Launched March 23, 2025
  • Indo-French Naval Exercise Varuna 2024 March 23, 2025
  • No Mismatch Between Circulating Influenza Strains and Vaccine Strains March 23, 2025
  • South Cascade Glacier March 22, 2025
  • Made-in-India Web Browser March 22, 2025
  • Charting a route for IORA under India’s chairship March 22, 2025
  • Mar-a-Lago Accord and dollar devaluation March 22, 2025

About

If IAS is your destination, begin your journey with Optimize IAS.

Hi There, I am Santosh I have the unique distinction of clearing all 6 UPSC CSE Prelims with huge margins.

I mastered the art of clearing UPSC CSE Prelims and in the process devised an unbeatable strategy to ace Prelims which many students struggle to do.

Contact us

moc.saiezimitpo@tcatnoc

For More Details

Work with Us

Connect With Me

Course Portal
Search