- IMF staff members and the Sri Lankan authorities have achieved employees-stage settlement on financial guidelines to conclude the next review of the 4-year EFF-supported plan and the 2024 Write-up IV Consultation. When the critique is authorised by IMF Management and finished by the IMF Executive Board, Sri Lanka will have obtain to SDR 254 million (about US$337 million) in funding.
- Macroeconomic coverage reforms are setting up to bear fruit. Sustaining the reform momentum and addressing governance weaknesses and corruption vulnerabilities are critical to set the economy on a path in the direction of lasting restoration and stable and inclusive advancement.
- Completion of the overview by the IMFs Government Board needs: (i) the implementation by the authorities of prior actions and (ii) the completion of financing assurances critique, confirming multilateral partners funding contributions and assessing enough progress with financial debt restructuring.
Soon after constructive discussions in Colombo, IMF Senior Mission Main Mr. Peter Breuer and Deputy Mission Main Ms. Katsiaryna Svirydzenka issued the subsequent assertion:
The IMF workforce achieved team-degree settlement with the Sri Lankan authorities on the 2nd assessment under the economic reform plan supported by a 4-calendar yearExtended Fund Facility (EFF) arrangementand concluded the 2024 Post IV Consultation conversations. The EFF arrangement was accepted by the IMF Government Board for a full amount of money of SDR 2.3 billion (about US$3 billion) on March 20, 2023.
The workers-amount arrangement is issue to the acceptance by IMF administration and the IMF Government Board in the period in advance, contingent on: (i) the implementation by the authorities of prior actions (ii) the completion of funding assurances overview, which will focus on confirming multilateral companions committed funding contributions and whether suitable progress has been built with the credit card debt restructuring to give confidence that the restructuring will be concluded in a timely way and in line with the plans credit card debt targets.
On completion of the Executive Board review, Sri Lanka would have accessibility to SDR 254 million (about US$337 million), bringing the whole IMF economical assist disbursed below the arrangement to SDR 762 million (about US$1 billion).
The authorities are earning great progress in employing an ambitious reform agenda underneath the EFF with commendable results, which includes speedy disinflation, robust reserve accumulation, and first symptoms of economic development even though preserving the steadiness of the economical technique. Public funds have strengthened pursuing significant fiscal reforms. Application efficiency was powerful, with all quantitative functionality conditions and indicative targets for conclude-December 2023 achieved other than for the indicative concentrate on on social paying out. Most structural benchmarks because of before close-February 2024 have been possibly met or carried out with hold off. Reforms in some locations are nonetheless ongoing.
The economic problem is step by step improving upon. Expansion turned favourable after 6 consecutive quarters of contraction, registering 1.6 % and 4.5 p.c y-o-y growth in the 3rd and fourth quarters of 2023 respectively. Significant-frequency economic indicators level to a continued select-up in producing, development, and products and services. Inflation has come down from a peak of 70 percent in September 2022 to 5.9 p.c in February 2024. Gross formal reserves enhanced to US$4.5 billion at stop-February 2024 with sizeable international exchange purchases by the central lender.
Sustaining the reform momentum is significant to set the overall economy on a route towards long lasting recovery and stable and inclusive financial expansion. We welcome the authorities determination to fiscal reforms. Continued progress in the direction of the introduction of the assets tax is significant, alongside one another with earnings actions to satisfy the profits mobilization goals in 2025 and beyond. Income administration and anti-corruption endeavours to boost tax collections are also key. Preserving charge restoration in gasoline and electricity pricing will enable reduce fiscal threats arising from point out-owned enterprises.
While inflation has decelerated faster than envisioned, ongoing monitoring is warranted to help anchor inflationary pressures and guidance macroeconomic stability. In opposition to ongoing external uncertainty, it remains essential to keep on to rebuild external buffers by solid reserves accumulation.
Sri Lankas Agreements in principle with the Formal Creditor Committee and Export-Import Bank of China on personal debt therapies consistent with method parameters were being important milestones putting Sri Lankas credit card debt on the route to sustainability. The vital upcoming ways are to finalize the agreements with the official creditors and attain Agreements in Basic principle with the principal exterior private creditors in line with program parameters in a well timed manner. This should really enable restore Sri Lankas financial debt sustainability around the medium phrase.
The authorities lately posted Motion Prepare to apply the vital recommendations of the Governance Diagnostic Report is a welcome stage. Sustained endeavours to implement these reforms will be necessary for addressing corruption hazards, rebuilding economic confidence, and building expansion more robust and inclusive.
The IMF mission staff satisfied with tea plantation staff in Nuwara Eliya and realized first-hand about some of the troubles Sri Lankas most susceptible deal with. Ongoing initiatives to increase concentrating on, adequacy, and coverage of social security nets, notably Aswesuma, remain important to secure the inadequate and the susceptible.
The IMF staff held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, Minister of Electricity and Power Mr. Kanchana Wijesekera, State Minister Mr. Shehan Semasinghe, Main of Employees to the President Mr. Sagala Ratnayaka, Secretary to the Treasury Mr. K M Mahinda Siriwardana, and other senior government and CBSL officials. The team also achieved with Parliamentarians, representatives from the private sector, civil modern society organizations, and progress associates.
We would like to thank the authorities for the great collaboration.
