IMF LOAN: CENTRAL BANK GOVERNOR ALLEGES U.S.

C O N F I D E N T I A L COLOMBO 000449


TREASURY FOR SUSAN CHUN
STATE FOR EEB/IFD BRIANA SAUNDERS AND SCA/INSB BINDI PATEL

E.O. 12958: DECL: 04/21/2019
TAGS: ECON EFIN CE
SUBJECT: IMF LOAN: CENTRAL BANK GOVERNOR ALLEGES U.S.
DESTABILIZATION OF CURRENCY

REF: A. COLOMBO 431

B. COLOMBO 385

C. COLOMBO 285

D. COLOMBO 244

Classified By: Ambassador Robert O. Blake, Reasons 1.4(b)(d)


1. (C) Central Bank Governor Nivard Cabraal called Ambassador
on April 21, in advance of his departure for WB/IMF meetings
in Washington, to complain that reports the U.S. will block
Sri Lanka's IMF stand-by loan agreement (SBA) are
destabilizing the Sri Lankan rupee and local markets. (Note:
The rupee fell to 117.25 on April 20, and was trading at
120.15 early on April 21; by late afternoon it was back up to
118.50. End note.) Cabraal asked Ambassador to confirm the
U.S. position on Sri Lanka's IMF request.


2. (C) Ambassador responded that the U.S. has never
suggested, publicly or privately, that we would block this
loan. He noted that, in a private lunch in honor of visiting
UNSYG Chief of Staff Vijay Nambiar hosted by Foreign Minister
Bogollagama on April 17, he told the Minister of the great
concern in the U.S. and other countries about the situation
in the northern safe zone and the need for the GSL to allow
time for a diplomatic attempt by the UN to persuade the LTTE
to allow the civilians to leave. The Ambassador elaborated
further for Cabraal, nothing that he cautioned Bogollagama
that if the GSL did not give diplomacy a chance, it could
expect mounting criticism from the international community.
This criticism could then manifest itself through policy
actions such as possible aid suspensions, closer scrutiny of
the IMF loan, and other measures. Ambassador surmised for
Cabraal that someone in the GSL might have leaked his
comments to the National Freedom Front (NFF),which is
currently engaged in demonstrating against alleged U.S. and
Norwegian interference. Cabraal appreciated the
clarification.


3. (C) When asked if he would carry a signed letter of intent
(LOI) to Washington, Cabraal admitted that he would not,
stating that the document is still quote undergoing a few
changes unquote. This tracks with information received from
Tourism Minister Milinda Moragoda, who told Ambassador on
April 20 that the President has yet to sign the LOI.


BLAKE