IMF completes sixth review of Sri Lanka’s economic performance and approves release of US$164 million
The International Monetary Fund (IMF) has completed its sixth review of Sri Lanka’s economic performance under the Extended Fund Facility (EFF) and has approved the release of US$ 164 million to the country.
Accordingly, the total support by the IMF to Sri Lanka so far stands at US$ 1.31 billion.
This is following the IMF the granting of a waiver of non observance for the end June 2019 performance criterion on the primary balance.
Sri Lanka’s extended arrangement was approved on June 3, 2016, in the amount of about SDR 1.1 billion (US$ 1.5 billion), or 185% of quota in the IMF at that time of approval of the arrangement. On 13 May, the Executive Board had approved an extension of the arrangement by one additional year, until 2 June 2020, with rephasing of remaining disbursements.
Following the Executive Board’s discussion of the review, IMF Deputy Managing Director and Acting Chair Mitsuhiro Furusawa stated, “The Sri Lankan economy is gradually recovering from the impact of the Easter Sunday terrorist attacks. Growth is projected to strengthen to 3.5% in 2020, from 2.7% in 2019, as tourist arrivals and related activities gradually recover.”
“Sustaining fiscal policy discipline remains critical to strengthen resilience and support growth, as important downside risks remain, amid heightened external and domestic uncertainty,” he has noted.
“The authorities are taking actions to mitigate the revenue shortfalls caused by the terrorist attacks and preserve the hard-won gains made under the program. Sustained efforts to mobilise revenues will be needed in 2020 to place public debt on a downward path, while preserving space for critical social and investment spending.
“The new fiscal rule framework and the establishment of an independent public debt management agency over the medium term will help anchor public debt sustainability. Advancing SOE reforms in the electricity sector will also be critical to reduce fiscal risks,” Furusawa has further noted.
The IMF official has also stated, “Sri Lanka has made important progress in strengthening the AML/CFT regime. Harmonising regulation and supervision of financial institutions, strengthening the macroprudential policy framework, and upgrading the contingency framework will help to safeguard financial stability.”
OSL take:
The IMF’s observations on Sri Lanka’s economy is a postive note on the country’s economic policies and overall growth. Sri Lanka’s economy has been on a growth path during the past few years and given the positive performance in several key sectors in the country. The island’s geographical positioning in the Indian Ocean, the ease of doing business environment in the country and the many trade agreements as well as the trade concessions enjoyed by the country have made it an ideal business destination in the South Asian region.
| Article Code : | VBS/AT/20191107/Z_1 |