Concludes second EFF facility review :
IMF ready to release US$ 337 Mn:
The International Monetary Fund (IMF) Sri Lanka and yesterday announced that they have reached a staff-level agreement on economic policies to conclude the second review of the four-year bailout programme, the global lender said on Thursday.
Under this review, which is to be ratified by the IMF’s board, will release an additional USD 337 million in funding for Sri Lanka.
“This will bring the total IMF financial support disbursed under the arrangement to SDR 762 million (about US$1 billion),” IMF Senior Mission Chief for Sri Lanka Peter Breuer said in Colombo yesterday.
“Macroeconomic policy reforms are starting to bear fruit. Sustaining the reform momentum and addressing governance weaknesses and corruption vulnerabilities are critical to put the economy on a path towards lasting recovery and stable and inclusive growth. We hope that this ‘hard’ reform process will continue which will take to a permanent economic recovery,” Breuer said.
Asked by Daily News if Sri Lanka had followed the IMF agenda in the right direction he said that the country had responded very positively and carried out the reform agenda with great success which resulted in Sri Lanka’s economic situation is gradually improving form a contraction to the positive territory and also lowering inflation from 70% to a single digit. He also said that one of the main reasons for Sri Lanka’s economic collapse was the depletion of reserves which resulted in weakening its purchasing power for essential items. Today Gross official reserves increased to a praiseworthy US$4.5 billion at end-February 2024.
Public finances have strengthened following substantial fiscal reforms.Program performance was strong, with all quantitative performance criteria and indicative targets for end-December 2023 met except for the indicative target on social spending.
“Most structural benchmarks due before end-February 2024 were either met or implemented with delay. Reforms in some areas are still ongoing.”
“Sri Lanka’s Agreements in principle with the Official Creditor Committee and Export-Import Bank of China on debt treatments consistent with programme parameters were important milestones putting Sri Lanka’s debt on the path towards sustainability.
“The critical next steps are to finalize the agreements with the official creditors and reach Agreements in Principle with the main external private creditors in line with programme parameters in a timely manner.”
This should help restore Sri Lanka’s debt sustainability over the medium term. “The authorities’ recently published Action Plan to implement the key recommendations of the Governance Diagnostic Report is a welcome step. Sustained efforts to implement these reforms will be essential for addressing corruption risks, rebuilding economic confidence and making growth more robust and inclusive. Asked if the looming elections resulted in some government politicians asking to relax or tone down some of the ongoing reforms he answered in the negative.
Asked if the high taxation could not be reduced he said that people did pay these enhanced taxes earlier as well. “However since the country’s economic situation has dipped some may think tax is an added burden.”
IMF Sri Lanka Resident Representative Sarwat Jahan, added that both the IMF and Sri Lanka have taken into account the difficult situation faced by the less privileged people and provided them several handouts.
“Continued efforts to improve targeting, adequacy, and coverage of social safety nets, particularly Aswesuma, remain critical to protect the poor and the vulnerable,” she said.
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