Sri Lanka agrees to $2.5B IMF loan

COLOMBO, Sri Lanka, July 21 (UPI) -- The International Monetary Fund has agreed to a $2.5 billion loan to Sri Lanka, subject to approval by the IMF executive board, officials said.

IMF Managing Director Dominique Strauss-Kahn said in a news release Monday the executive board will consider the matter Friday. Once approved, the loan would allow Sri Lanka initially to draw up to $313 million to meet its immediate needs.

"Persistently high budget deficits have forced the government to rely on short-term financing from international markets. The global financial shock resulted in a sudden stop to this financing, capital outflows, and a significant loss of Sri Lanka's international reserves," he said.

The country also needs resources for reconstruction with the end in May of the 26-year-old civil war against the Tamil Tiger rebels who had been fighting for a separate homeland for the island's Tamil-speaking minority.

The Sri Lankan government has asked the European Union to take action against those it claimed were connected with the network of the Tamil Rebels which remains intact in Europe, the Press Trust of India reported.

Ravinatha Aryasinha, Sri Lankan ambassador to the European Union, said while the rebels' military strength had been destroyed, their international network, particularly in Europe, remains intact.

"Unless the (European Union) acts urgently to arrest this trend, the situation could get worse," Aryasinha was quoted as telling the Members of the European Parliament.