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Talks still on with SLanka on bailout package: IMF

[AFP, Saturday, 2 May 2009 07:28 No Comment]

The IMF said Friday that talks with Sri Lanka for a bailout package of around two billion dollars were still continuing despite reports the fund was under pressure to withold the planned financing.


"Discussions with the authorities on an IMF-supported program are still ongoing," a spokesperson for the Washington-based fund told AFP when asked to comment on reported calls to withold the funding to encourage Colombo to do more to help civilians caught up in fighting with the rebel Tamil Tigers.

The Sri Lankan army said Friday that its troops were ready to launch a final assault on the last pocket of Tiger resistance in the north of the country, an area where thousands of civilians are trapped by the fighting.

US officials in Washington have indicated that they want the IMF loan to Sri Lanka, aimed at helping the low-income Asian country cope with the global financial crisis, delayed to prod Colombo to step up aid to war-ravaged civilians, news reports have said.


An IMF mission is now in Sri Lanka conducting a "safeguard assessment" to ensure there are enough controls to verify that the IMF funds for balance-of-payments support are not used for other purposes, the country’s central bank said.


Sri Lankan central bank governor Nivard Cabraal said in Colombo that the IMF loan was on track and procedures such as safeguard assessments had to be finished regardless of whether the United States was dragging its feet over the loan.


Jeff Anderson, a US embassy spokesman in Colombo, rejected any notion that Washington was threatening to stop the IMF loan, which according to reports ranges from 1.9 billion dollars to 2.4 billion dollars.


"We’ve never threatened publicly or privately that we will block the IMF loan," he said.


But the French ambassador to the United Nations in New York, Jean-Maurice Ripert, was quoted in a media report as saying that the "Americans want to play with the question of the IMF loan."


The United States has the largest vote in the IMF followed by Japan.


US and European sources suggested that because of the political dimension to Sri Lanka’s loan application — which said that the money was required in part to resettle those displaced from the fighting in the north and east of the country — the issue of how precisely it would be delivered would come within the IMF’s remit as well as the economic criteria for the loan, according to the the Guardian newspaper in Britain.


The British foreign office in London said IMF had not yet presented a program for Sri Lanka and London had not been asked to vote on it.


"Once a program is presented, we will assess it on its merits and the situation at the time to decide whether it will help the people of Sri Lanka," a foreign office spokesperson said.


"The UK is committed to supporting Sri Lanka to help it through this economic crisis. But both we and the IMF need to be assured that the government is in a position where it can credibly implement a program of macroeconomic reform and make good use of any money that is provided.


"We urge the Sri Lankan government to work to provide the international community with this assurance," the spokesperson said.


The foreign ministers of Britain and France, David Miliband and Bernard Kouchner, visited Sri Lanka this week to push for an end to the fighting as well as for aid agency access to trapped civilians.


But the peace mission ended in failure although the two Security Council powers have promised to maintain pressure on the Sri Lankan government.


Claude Heller, the Mexican ambassador who presided the 15-nation UN Security council in April, indicated there was no pressure at the council to withold the IMF loan.


"No … I have not heard anyone suggesting this at this time," he said in response to a question after an informal council discussion on the Sri Lankan situation late Thursday.


According to the United Nations, some 50,000 civilians are still trapped in Liberation Tigers of Tamil Eelam (LTTE) territory while as many as 6,500 civilians may have been killed and another 14,000 wounded in the government’s offensive so far this year.


About 110,000 Tamils displaced by the violence have been detained in congested government-run camps, where food, water and medical shortages have been reported.

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