Sri Lanka has cancelled a deal to raise a 200 million-dollar loan syndicated by Deutsche Bank because the terms were unfavourable, a senior government official said Thursday.
The government cancelled the loan deal and was now looking at several other options to raise much needed foreign currency, said Mano Tittawela, director general of the country's privatisation agency.
Last month, Treasury Secretary P. B. Jayasundera said the government was not willing to pay more than 7.0 percent interest to secure the financial package through Deutsche Bank.
Sri Lanka has been looking for international loans as the economy has slowed sharply following the Tamil rebel attack against the country's only international airport in July.
Jayasundera was in August optimistic of obtaining a second tranche of a rescue package the International Monetary Fund (IMF) granted in April in a bid to shore up Sri Lanka's dwindling foreign reserves.
However, official sources said the government will have to enter into a fresh agreement with the IMF to secure the 30 million-dollar tranche out of the 253 million-dollar stand-by credit facility.
Tittawela said the IMF had released the first tranche of 131 million dollars and the second would come only after the completion of a review in about three months.
Jayasundera said Sri Lanka was also expecting a 500 million-dollar package through the IMF's Poverty Reduction and Growth Facility (PRGF).
The IMF announced last month that Sri Lanka's economy grew by a provisional 1.0 percent in the first six months of the year, down from the original forecast of 3.0 to 4.0 percent.
Exports had dropped by 1.5 percent in the first half of the year to 2.43 billion dollars, according to the central bank's latest figures.
The IMF recently warned that Sri Lanka could be headed for more difficult times following the July 24 rebel attack and the subsequent fall in tourism and international trade which account for more than a third of the country's gross domestic product (GDP).
"Notwithstanding a satisfactory performance through June, indications are that the budget is likely to come under increasing pressure in the second half of 2001," the IMF said.
"The recent airport attack has also negatively impacted on the budget and revenues from tourism and exports, as well as the general business confidence." |
