IMF personnel and the Sri Lankan authorities have actually reached staff-level agreement on economic policies to conclude the third review of Sri Lankas financial reform program supported by the IMFs Extended Fund Facility (EFF).
Once the review is authorized by IMF Management and completed by the IMF Executive Board, Sri Lanka will have access to about US$ 333 million in financing, a statement said.The brand-new governments commitment to the program objectives has boosted confidence and ensures policy connection, it said, adding that sustaining the reform momentum is important to protecting the hard-won gains under the program so far and putting the economy on a course towards long lasting healing and steady and inclusive growth.The IMFs Executive Board will think about completion of the review based upon the implementation by the authorities of previous actions; and the completion of funding guarantees examine, validating multilateral partners funding contributions and examining appropriate development with debt restructuring, the declaration added.An International Monetary Fund (MF) group led by Peter Breuer, Senior Mission Chief for Sri Lanka, visited Colombo from November 17 to 23, 2024.
After useful conversations in Colombo, Mr.
Breuer and Deputy Mission Chief Ms.
Katsiaryna Svirydzenka issued the following declaration: We are delighted to announce that the IMF group reached staff-level arrangement with the Sri Lankan authorities on the third evaluation under the 4-year Extended Fund Facility (EFF) plan.
The plan was authorized by the IMF Executive Board for an overall quantity of SDR 2.3 billion (about US$ 3 billion) on March 20, 2023.
The staff-level agreement is subject to the approval by IMF management and the IMF Executive Board, contingent on: (i) the implementation by the authorities of previous actions consisting of the submission of a 2025 budget constant with program objectives; and (ii) the conclusion of funding guarantees examine, which will concentrate on validating multilateral partners committed funding contributions and whether appropriate development has actually been made with the debt restructuring to provide self-confidence that the restructuring will be concluded in a prompt way and in line with the programs financial obligation targets.Upon conclusion of the Executive Board review, Sri Lanka would have access to SDR 254 million (about US$ 333 million), bringing the overall IMF financial support paid out under the arrangement to SDR 1,016 million (about US$ 1,333 million).
Sri Lankas enthusiastic reform program supported by the EFF is providing good outcomes.
The economy expanded typically by 4 percent y-o-y in the four quarters ending in June 2024.
High-frequency signs point to ongoing growth throughout all sectors.
Typical heading and core inflation stayed contained at 0.8 and 3.8 percent during the third quarter.
Gross official reserves increased to US$ 6.4 billion at end-October 2024 with large forex purchases by the Central Bank.
Public financial resources have strengthened following substantial financial reforms.Program performance was strong, with all quantitative performance criteria and indicative targets (IT) for end-June 2024 met, as well as the ITs for end-September 2024, except for the IT on social spending.
A lot of structural criteria due before October-2024 were either fulfilled or implemented with hold-up; some standards are postponed due to the fact that of the election cycle.The brand-new federal governments commitment to the program objectives has actually improved confidence and ensures policy continuity.
Sustaining the reform momentum is important to securing the hard-won gains of the program and putting the economy on a path towards lasting healing and stable and inclusive development.
Because the crisis has actually affected Sri Lankas entire population, it will be important to make sure that the take advantage of economic development are shared appropriately.Maintaining macroeconomic stability and restoring financial obligation sustainability are crucial to protecting Sri Lankas prosperity and need persevering with accountable fiscal policy.
Continued income mobilization efforts and costs restraint are required to prepare the 2025 budget in line with program criteria.
Earnings administration reforms and efforts to enhance tax compliance will assist to make sure that the burden originating from the crisis is shared proportionately to taxpayers ability to contribute.
Avoiding brand-new tax exemptions will help in reducing fiscal revenue leaks, corruption dangers and build much required financial buffers, including for social costs and to support Sri Lankas most susceptible.
Preserving expense healing in fuel and electricity prices and dealing with legacy financial obligations will assist reduce fiscal threats emerging from state-owned enterprises.The government has an important responsibility to safeguard the bad and susceptible at this challenging time.
It is essential to redouble efforts to satisfy the programs minimum costs target on social spending and to enhance targeting, adequacy, and coverage of social safety nets, especially Aswesuma.While inflation has actually decreased faster than expected, continued tracking is necessitated to make sure continual rate stability and assistance macroeconomic stability.
Versus ongoing worldwide uncertainty, it stays important to continue reconstructing external buffers through strong reserves accumulation.Sri Lankas current Agreement in Principle with bondholders is a crucial milestone putting Sri Lankas debt on a course towards sustainability.
The important next actions are to complete the commercial financial obligation restructuring, complete bilateral contracts with official financial institutions along the lines of the accord with the Official Creditor Committee and carry out the regards to the other contracts.
This will assist bring back Sri Lankas financial obligation sustainability.The new governments mandate will revitalize governance reforms attending to corruption risks, reconstructing economic confidence, and making growth more robust and inclusive.The IMF team convened with His Excellency President and Finance Minister Anura Kumara Dissanayake, Honorable Labor Minister and Deputy Minister of Economic Development Prof.
Anil Jayantha Fernando, Honorable Deputy Minister of Finance and Planning Dr.
Harshana Suriyapperuma, Senior Economic Advisor Duminda Hulangamuwa, Central Bank of Sri Lanka Governor Dr.
P.
Nandalal Weerasinghe, Secretary to the Treasury Mr.
K M Mahinda Siriwardana, and other senior federal government and CBSL officials.
The team also consulted with Parliamentarians, representatives from the economic sector, civil society organizations, and advancement partners.We would like to thank the authorities for the excellent cooperation.