International Monetary Fund approves resumption of US$ 1.5 billion Extended Fund Facility
The Executive Board of the International Monetary Fund (IMF) has reportedly approved the resumption of the US$ 1.5 billion Extended Fund Facility (EFF) and the extension of the programme by one year.
The IMF issuing a statement has noted that the programme will run until 2 June 2020, with re-phasing of remaining disbursements.
The approval would also mean Sri Lanka will receive the latest US$ 164.1 million disbursement that was initially due last November.
The IMF has agreed to grant waivers for the 2018 performance criteria on the primary balance and net official international reserves, which were disrupted due to the Constitutional crisis that saw the program being suspended.
The latest tranche brings total disbursements under the arrangement to about US$ 1.155 billion.
Sri Lanka’s three-year extended arrangement was approved on June 3, 2016, in the amount of about US$ 1.5 billion, or 185% of quota in the IMF at the time of approval of the arrangement.
Following the Executive Board’s discussion of the review, IMF Deputy Managing Director Mitsuhiro Furusawa has said, “The Sri Lankan authorities have successfully brought the program back on track, despite important setbacks, by advancing fiscal consolidation through a well-targeted 2019 budget, rebuilding reserves, while maintaining a prudent monetary policy under greater exchange rate flexibility, and reviving structural reforms. Sustaining policy discipline remains critical to strengthen resilience, given still sizable public debt and low external buffers, and support strong and inclusive growth.”
He has pointed out sustained revenue mobilization was needed to place public debt on a downward path, while making space for critical public investment and an expansion of the social safety net under well-defined selection criteria. Strengthening the selection and appraisal process of large-scale investment projects and assessing their fiscal affordability is critical, he added, given Sri Lanka’s high public debt. Stronger fiscal rules and a medium-term debt management strategy will support medium-term fiscal consolidation and debt reduction efforts.
“The authorities should renew their efforts to strengthen State Owned Enterprise (SOE) governance and transparency, including by advancing a restructuring plan for SriLankan Airlines and completing energy pricing reforms, building on important progress with the implementation of the fuel pricing formula.”
The IMF has called on the Central Bank of Sri Lanka to pursue a prudent and data-dependent monetary policy. They pointed out amendments to the Central Bank law will be a major step in the transition to flexible inflation targeting.
OSL take:
The decision by the IMF to continue with the EFF for Sri Lanka is an indication that the country’s economy is on a steady growth path. The infusion of IMF funds to Sri Lanka would further strengthen the country’s economy. Therefore foreign businesses/investors could explore business opportunities in Sri Lanka.
| Article Code : | VBS/AT/17052019/Z_1 |