Numbers & Statistics

IMF Executive Board Completes the Sixth Review of Sri Lanka’s Extended Arrangement under the Extended Fund Facility

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Via IMF (Den Internationale Valutafond)

On November 1, 2019, the Executive Board of the International Monetary
Fund (IMF) completed the Sixth Review of Sri Lanka’s economic
performance under the program supported by an extended arrangement
under the Extended Fund Facility (EFF)

[1]
. The completion of the Sixth review, upon the granting of a waiver of
non‑observance for the end‑June 2019 performance criterion on the
primary balance, enables the disbursement of SDR 118.5 million (about
US$164 million), bringing total disbursements under the arrangement to
SDR 952.23 million (about US$1.31 billion).

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 percent of
quota in the IMF at that time of approval of the arrangement. See

Press Release No. 16/262
). On May 13, 2019, the Executive Board approved an extension of the
arrangement by one additional year, until June 2, 2020, with rephasing
of remaining disbursements (See

Press Release No. 19/162
).

Following the Executive Board’s discussion of the review, Mr. Mitsuhiro
Furusawa, Deputy Managing Director and Acting Chair of the Board,
issued the following statement:

“The Sri Lankan economy is gradually recovering from the impact of the
Easter Sunday terrorist attacks. Growth is projected to strengthen to
3.5 percent in 2020, from 2.7 percent 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.

“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 mobilize 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.

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“The Central Bank of Sri Lanka should maintain a data dependent monetary
policy. The new Central Bank Act will be a milestone reform towards the
adoption of flexible inflation targeting. Efforts to build reserves
should be sustained to protect the economy against shocks, allowing for
exchange rate flexibility in the event of market pressures.

“Sri Lanka has made important progress in strengthening the AML/CFT
regime. Harmonizing regulation and supervision of financial
institutions, strengthening the macroprudential policy framework, and
upgrading the contingency framework will help to safeguard financial
stability.

“Further progress in the structural reform agenda is essential to
bolster competitiveness and achieve stronger and inclusive growth.
Efforts should focus on liberalizing trade, by gradually removing para
tariffs while addressing their revenue impact, strengthening the
governance and anti corruption framework, promoting women’s economic
empowerment, building climate resilience and enhancing social
protection”.



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