Sri Lanka seeks another IMF bailout after record loan

Sri Lanka announced the completion of a $2.6 billion IMF bailout, but it was seeking fresh loans to support an economy emerging from decades of ethnic war. The International Monetary Fund on Friday released the final instalment of the bailout agreed in July 2009, two months after Colombo defeated Tamil rebels in a major offensive to end the drawn-out conflict. The drawing down the final instalment of the bailout package marked the longest engagement Sri Lanka has had with the IMF and the single largest facility from a multilateral institution, the Central Bank of Sri Lanka said. "Sri Lankan authorities now look forward to the continued close engagement with the IMF and intend to discuss the possibility of financial support for its economic development agenda..." the bank said in a statement. It did not say how much Sri Lanka hoped to secure from the IMF by way of fresh loans, but finance ministry sources said Colombo was looking at more than $500 million as a first step. The original July 2009 IMF bailout was secured when the island's foreign reserves had dropped to a dangerously low level of $1 billion, or just sufficient to support a couple of week's imports. Since then, Sri Lanka has built up reserves which could finance imports of up to three and a half months, according to the bank. However, a $10 billion trade deficit at the end of last year caused the local currency to depreciate by about 18 percent this year. Last week, Sri Lanka raised $1 billion through a bond issue that was over subscribed by a record 10.5 fold despite volatility in global markets, according to the central bank. Sri Lanka's economy grew 8.3 percent last year, up from 8.0 percent in 2010, the first full year after government forces crushed the Tamil Tiger rebels. However, the IMF has said it forecasts Sri Lanka's economy to grow at a slower rate this year.