The IMF Executive Board has approved the first review under the 48-month Extended Fund Facility with Sri Lanka, providing access to SDR 254 million (about US$337 million), totalling SDR 508 million (about US$670 million) out of SDR 2.286 billion (about US$3 billion). Sri Lanka’s performance was satisfactory, meeting most targets, indicating macroeconomic stabilisation.
The authorities are urged to sustain reforms, focusing on revenue mobilisation, energy pricing alignment, social safety nets, external buffers, anti-corruption measures, and governance enhancement. Emphasising a revenue-based fiscal consolidation and implementing revenue administration reforms is crucial.
The Central Bank of Sri Lanka should continue its disinflation strategy, prioritising reserves accumulation with exchange rate flexibility. Bank recapitalisation and financial supervision strengthening are vital for financial sector stability.
Sri Lanka’s agreements on debt treatments with the Official Creditors Committee and China’s Export-Import Bank align with program targets, requiring timely implementation and resolution with private creditors for medium-term debt sustainability. The Governance Diagnostic Report publication, a program benchmark, reflects a commendable step in enhancing governance, with commitment to its recommendations expected to yield economic benefits.
Authorities’ commitment to strengthening social safety nets, including a spending floor, objective eligibility criteria, and dynamic Social Registry, is welcomed for supporting the poor and vulnerable. Continued close engagement with authorities is anticipated, acknowledging their commitment to reforms and governance improvements.