Colombo, Apr 29 (PTI) The new 44 per cent Trump tariff on Sri Lankan exports to the US would have a significant impact, the IMF said on Tuesday.

The International Monetary Fund (IMF) is open to accommodating the impact in implementation of the Extended Fund Facility (EFF), Evan Papijorju, IMF Mission Chief for Sri Lanka, told an online press conference from the US capital.

Papijorju said the impact on the apparel and rubber industries accounts for a very large share of the country's exports to the United States.

“I believe it's almost three quarters, or over 70 per cent. And also the real sector implications of this are very important, because these two sectors, apparel and rubber, employ a lot of workers in Sri Lanka. Just the apparel industry alone has over 3,00,000 workers.” Papijorju added that the 90-day pause that was announced has allowed the authorities to engage constructively with the United States. “We take very positive note of this.

Now, within, you know, obviously in general, as I mentioned, the global trade policy integrity for any small open economy and definitely for Sri Lanka poses significant downside risks.

“We understand obviously the issues that arise and how they should be baked into the programme. If there is any substantial risk that may pan out, either on the back of tariffs or some other disruption, we will work with the authorities to incorporate them, to assess their impact”.

Sri Lanka has started negotiations with the US on the new tariffs and the government remains hopeful of a positive breakthrough.

The IMF and Sri Lanka on April 25 reached an agreement in Washington on the fourth review of the USD 2.9 billion EFF programme, which was originally approved in March 2023 to assist Sri Lanka in navigating its worst economic crisis since independence.

IMF in a statement then commended the Sri Lankan government, led by President Anura Kumara Dissanayake, for its continued commitment to the economic reforms initiated under the EFF. “The new government’s sustained commitment to programme objectives has enhanced confidence and ensures policy continuity. Going forward, sustaining reform momentum, including by reducing corruption vulnerabilities, is critical to safeguard the hard-won gains, durably restore macroeconomic and debt sustainability, and unlock robust and inclusive growth,” the IMF said.

Upon formal approval by the IMF Executive Board, Sri Lanka is set to receive the fifth tranche of approximately USD 344 million. PTI CORR NPK NPK

Trade tariffs threaten Sri Lanka's export sectors; IMF may adjust EFF implementation to accommodate economic disruption. A newly imposed tariff on Sri Lankan exports threatens major disruption to apparel and rubber sectors that dominate US-bound exports and employ large numbers of workers. The IMF has noted the 90 day pause has allowed engagement with the United States and says it will work with Sri Lankan authorities to assess and, where necessary, accommodate tariff related or other trade disruption risks in the implementation of the Extended Fund Facility programme. A fourth review was concluded and a subsequent tranche awaits formal executive approval.