By Colombo Telegraph –

“Cabral started the meeting by noting his disappointment that Sri Lanka’s request for an IMF Stand–by–Arrangement has not come through, and has not yet backed the request. He underscored that the GSL has done all that the IMF has asked including, for example, introducing new tax measures and altering its monetary policy.” the US Embassy Colombo wrote to Washington.

The Colombo Telegraph found the related leaked cable from the WikiLeak database. The cable classified as “CONFIDENTIAL” and recount details of a meeting Charge d’Affaires James R Moore of the US Embassy has had with the Central Bank Governor Ajith N Cabraal and his staff on March 12, 2009.

“In a collegial but stern conversation, Central Bank Governor told Charge that the GSL is disappointed by the lack of U.S. support for its IMF Stand–by-Arrangement (SBA) and concerned that U.S. attempts to place political conditions on GSL’s request are inappropriate” Charge d’Affaires James R Moore wrote. “Cabraal and Deputy Governor Jayamaha noted that the delay has put Sri Lanka and local markets under pressure that the GSL had not anticipated.” he further wrote.

Cabraal - We have done all that the IMF has asked

According to the leaked US diplomatic cable Charge d’Affaires detailed US concern about the GSL’s ability and commitment to carry out an effective program in the current conflict circumstances. Charge said that GSL conduct in the final stages of the war, and the way humanitarian issues are handled, will greatly influence the government’s ability to reconcile and reconstruct the country after the conflict, as well as the willingness of the international community to support reconstruction efforts. Charge stated that until the humanitarian situation in the North is clarified, it will be difficult to assess the actual cost of meeting the immediate and longer term needs of the people and reconstruction, as well as security expenditures. Charge encouraged the GSL to improve its humanitarian practices with an eye towards gaining wide donor support for near – term reconstruction needs.

The Charge d’Affairs wrote “Cabraal said that these issues have nothing to do with the economic basis on which IMF loan is determined, stating that holding economic measures to political conditions is not tenable nor fair. He noted that he is very upset that the ‘whole composition of IMF will be disturbed by this new political dimension’ that U.S. is placing on Sri Lanka’s request. Jayamaha underscored that the domestic conflict is not be, and that the GSL has borrowed 22 times from IMF since 1976, most recently in 2001, 2003 and 2005. What the U.S. is doing, cabraal continued, ‘is shocking to us’”

Charge asked Cabraal about his recent trip to Libya, and reports of the government’s efforts to secure a USD 500 million, 15 year loan. The Governor stated that, in the current absence of an IMF loan, the government is rightly pursuing ‘plan B’ options.

Placing a comment Moor wrote “It appears unlikely the GSL will submit an LOI until there is some confirmation of U.S. support. However, we can expect that in the meanwhile they will do their best to approach others, including China, Iran and Saudi Arabia, for assistance”

Read the below cable for further details;

Related news;

WikiLeaks – We have done all that the IMF asked – Basil said to US

WikiLeaks: In reality economic decisions are made by Rajapaksa brothers

VZCZCXRO3169
OO RUEHBI
DE RUEHLM #0523/01 1331151
ZNY CCCCC ZZH
O 131151Z MAY 09
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9968
INFO RUEHKA/AMEMBASSY DHAKA PRIORITY 1661
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 8663
RUEHKT/AMEMBASSY KATHMANDU PRIORITY 6898
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 3027
RUEHCG/AMCONSUL CHENNAI PRIORITY 9289
RUEHBI/AMCONSUL MUMBAI PRIORITY 6596
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 000523

SIPDIS

DEPT FOR EEB/IFD/OMA BRIANA SAUNDERS AND SCA/INSB
TREASURY FOR SUSAN CHUN

E.O. 12958: DECL: 05/12/2019
TAGS: EFIN ECON PREL PHUM KDEM CE
SUBJECT: SRI LANKA:  CB GOVERNOR DISAPPOINTED ABOUT IMF
REQUEST

REF: A. COLOMBO 508
     ¶B. OWEN-MOORE EMAIL 05/06/09
     ¶C. COLOMBO 488
     ¶D. SECSTATE 41959
     ¶E. COLOMBO 449
     ¶F. COLOMBO 431
     ¶G. COLOMBO 385
     ¶H. COLMOBO 285
     ¶I. COLOMBO 244

Classified By: Charge d'Affaires James R Moore Reasons 1.4(b)(d)

¶1. (C) Summary:  In a collegial but stern conversation,
Central Bank Governor Cabraal told the Charge that the GSL is
disappointed by the lack of U.S. support for its IMF Stand-by
Arrangement (SBA) and concerned that U.S. attempts to place
political conditions on the GSL's request are inappropriate.
Cabraal also underscored that the GSL has met all IMF
requirements.  In discussing reconciliation and
reconstruction of the North, Cabraal emphasized that it is
both the government's responsibility and desire to quickly
rebuild the North, and to ensure that its people are able to
quickly return to their home and livelihoods.  In the absence
of an IMF SBA, the GSL is looking to other countries for
financial support.  End summary.

¶2. (C) Charge and Econ Chief met with Central Bank Governor
Nivard Cabraal on May 12.  Cabraal started the meeting by
noting his disappointment that Sri Lanka's request for an IMF
(SBA) has not come through, and noted in particular his
disappointment that the U.S. has not yet backed the request.
He underscored that the GSL has done all that the IMF has
asked including, for example, introducing new tax measures
and altering its monetary policy.  Cabraal and Deputy
Governor Jayamaha noted that the delay has put Sri Lanka and
local markets under pressure that the GSL had not anticipated.

¶3. (C) Charge detailed ref b points, noting U.S. concern
about the GSL's ability and commitment to carry out an
effective program in the current conflict circumstances.
Charge said that GSL conduct in the final stages of the war,
and the way humanitarian issues are handled, will greatly
influence the government's ability to reconcile and
reconstruct the country after the conflict, as well as the
willingness of the international community to support
reconstruction efforts.  Charge stated that until the
humanitarian situation in the North is clarified, it will be
difficult to assess the actual costs of meeting the immediate
and longer term needs of the people and reconstruction, as
well as security expenditures.  Charge encouraged the GSL to
improve its humanitarian practices with an eye towards
gaining wide donor support for near-term reconstruction needs.

4.(C) Cabraal said that these issues have nothing to do with
the economic basis on which an IMF loan is determined,
stating that holding economic measures to political
conditions is not tenable nor fair.  He noted that he is very
upset that the "whole composition of the IMF will be
disturbed by this new political dimension" that the U.S. is
placing on Sri Lanka's request.  Jayamaha underscored that
the domestic conflict is not new, and that the GSL has
borrowed 22 times from the IMF since 1976, most recently in
2001, 2003, and 2005.  What the U.S. is doing, Cabraal
continued, "is shocking to us."

¶5. (C) Cabraal went on to note that it is the GSL's job to
care for its people and to reconstruct the North, whether or
not the donor community plans to assist.  He underscored the
entire government's deep commitment to do so, outlining, as
an example, a specific Central Bank plan to provide Rs 3
billion (USD 26 million) worth of credit facilities for
capital investment in the Northern Province.  He said having
people return to their homes and their livelihoods quickly,
as has happened in the East due to significant government
efforts, is key.  Addressing some public stories that the
government is not treating Northern Tamils appropriately,
Cabraal noted that it would not be in the government's
interest to hurt them.  The current government will soon be
seeking their votes.  Cabraal went on to highlight that he
recently met with members of the Sri Lankan Diaspora -- both
Sinhalese and Tamils -- in Rome and London to encourage them
to contribute to rebuilding the North and to outline the

COLOMBO 00000523  002 OF 002

special concessions that will be available for them to ease
the entry of capital back into the market.  "We want their
assistance," he said, implying that if the government did not
fairly treat those within its care, they would not get it.

¶6. (C) Charge noted that the U.S. continues to weigh whether
the proposed SBA can be effective based on the GSL's
commitment to reform and garnering public support to ensure
success in an IMF-supported macroeconomic stabilization
program under the current circumstances.  Cabraal stated that
if the U.S. is keen to see reconstruction happen quickly,
then the U.S. should support this loan.  Approval of the SBA
will stabilize the economy and encourage the Diaspora and
investors to reinvest in the North and East.

¶7. (C) When asked why the government has not yet submitted a
signed LOI, Cabraal stated that the IMF had asked the
government to hold the LOI out of concern that the U.S. will
not support it, thereby -- in Cabraal's words -- "causing a
crisis for them as well."  Cabraal stated that if given the
go ahead by the IMF, he could have the LOI immediately signed
and submitted by President (and Finance Minister) Rajapaksa.
He said holding the request was not his preference; he favors
the request going forward.  If it fails, so be it; the IMF
members have the right not to approve it.  Jayamaha and
Central Bank Chief Economist Nandalal Weerasinghe interrupted
to again stress that the GSL has met all IMF requirements.
Cabraal also noted that other countries, including the
Chinese, Japanese, and Russian IMF Executive Directors he met
with in Washington, are all very supportive of Sri Lanka's
request and its actions to date to fulfill IMF requirements.

¶8. (C) Charge asked Cabraal about his recent trip to Libya,
and the reports of the government's efforts to secure a USD
500 million, 15-year loan.  The Governor stated that, in the
current absence of an IMF loan, the government is rightly
pursuing "plan B" options.  He stated that a team is in Libya
now working on the deal.  Econ Chief asked if the GSL is also
pursuing loans or currency swaps from other countries, such
as China.  Cabraal did not go into specifics, but stated that
the government is looking at other possibilities.

COMMENT
--------

¶9. (C)  Cabraal noted that some members of his team had
advised him against pursuing an IMF SBA.  When the Charge
asked why they would do so, Cabraal said because they were
concerned "something like this" would happen.  When Charge
again asked why they would think so, Cabraal appeared stumped
and was unable to connect the dots.  It appears unlikely the
GSL will submit an LOI until there is some confirmation of
U.S. support.  However, we can expect that in the meanwhile
they will do their best to approach others, including China,
Iran, and Saudi Arabia (from which Foreign Minister
Bogollagam just returned), for assistance.
MOORE