Sri Lanka is expected to have a staff-level agreement with the IMF by early December, First Capital Research said in their Monthly Economic Watch for November.
“A full IMF review completion will await the new government’s budget actions after the November elections.”
Sri Lanka has received approximately USD 1Bn in three installments from the USD 3.Bn IMF facility to date. Sri Lanka’s third IMF review is delayed due to elections and the 2025 budget submission. Sri Lanka aims to complete its debt restructuring by 2024 end, with Central Bank Governor Nandalal Weerasinghe confident of a swift exit from the default rating category.
Supported by the IMF, Sri Lanka has reached debt agreements with official and private creditors, targeting completion by December. The restructuring includes macro-linked bonds tied to economic growth and a planned debt deal with the China Development Bank. “The Governor anticipates a rating upgrade once repayments begin, helping Sri Lanka move out of the default category.”
Meanwhile the Report also says that MoM inflation further declined by -0.5% MoM with the Food group remaining stagnant at -0.6% and the Non-food group inflation decreasing to -0. Notably, the YoY figure further decreased to -0.8% in Oct 2024. YoY inflation of the food group increased to 1% in October 2024 from -0.3% in September 2024, while Non-Food group continued to decrease to -1.6% in October 2024.5%. Private sector credit expanded for the fourth consecutive month by LKR 135.1Bn in August 202
On September 24, earnings from exports inclined by 4.1%YoY to USD 1,011.7 Mn, up from USD 971.9Mn on September 23. The growth was primarily driven by industrial exports.
The YoY increase in industrial goods exports in Sep 24 was mainly contributed by textiles and garments, as well as petroleum products. “However, earnings from exports of agricultural goods declined in Sep 24 due to lower exports of seafood, minor agricultural products and tea, despite a rise in export earnings of spices. Earnings from mineral exports also decreased in September 24.4.
Commenting on global markets the report said that the U.S. economy expanded at a robust pace in the third quarter, with inflation adjusted GDP increasing at a 2.8% annualized rate. This growth was driven by accelerated household purchases and increased federal defense spending. Consumer spending advanced by 3.7%, the most since early 2023. A Reuters poll projects global economic growth will hold steady at 3% in 2025, supported by anticipated interest rate cuts across major economies.
Rupee appreciates 10.7% against US dollar
During the year up to November 8, 2024, the Sri Lanka rupee appreciated against the US dollar by 10.7%. Workers’ remittances reached USD 5,431.5 until October end 2024 showing an 11% increase as against the corresponding period of 2023 which stood at 4,862.5.
Remittance receipts amounted to US dollars 587.7 million in October 2024, compared to US dollars 555.6 million in September 2024 and US dollars 517.4 million in October 2023. The gross official reserves were provisionally estimated at USD 6,467 million as at end October 2024.
This includes proceeds from the People’s Bank of China (PBOC) swap arrangement, which is subject to conditionalities on usability.
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