IMF in contact with counterparts | Sunday Observer

IMF in contact with counterparts

The International Monetary Fund (IMF) is monitoring the situation in Sri Lanka closely and remains in contact with its counterparts at technical level, said an official from Washington when contacted regarding the IMF’s program with Sri Lanka following recent political developments in the country.

“The IMF is not in the political realm, but clearly we take note of recent developments in Sri Lanka,” he said.

IMF Director Communications Gerry Rice at a regular media briefing in Washington last week said he had no assessment as yet on potential program implications in Sri Lanka.

Many attempts to contact officials of the Central Bank of Sri Lanka in this regard failed.

An IMF staff team led by Manuela Goretti was in Colombo in mid September to hold discussions on the fifth review of the economic program supported by the three-year Extended Fund Facility (EFF).

The team made the following statement: “Macroeconomic performance has been mixed in the first half of 2018, with growth recovering gradually and inflation stabilising in the mid-single digits. The current account deficit widened on the back of higher fuel imports, despite strong export performance, while international reserves declined from their peak level in April, amid volatile global market conditions. Growth is projected to remain below 4 percent in 2018, and gradually reach 5 percent over the medium-term.”

The mission commended the authorities on their continued efforts to advance the economic reform program. The quantitative performance target on the primary surplus for end-June 2018 was met and inflation remained within the CBSL’s band, although reserve accumulation and tax revenues fell short of program targets due to the weaker economic environment and delays in policy implementation.

However, the team recommended that a strong policy mix and exchange rate flexibility are critical to strengthen the economy’s resilience to market volatility, while supporting competitiveness and growth.

Advancing revenue-based fiscal consolidation in the 2019 budget can support Sri Lanka’s ambitious social and development goals while reducing public debt.

The team also noted that the authorities should sustain reform efforts to support trade, investment and inclusive growth.

The IMF completed the fourth review on the economic performance of Sri Lanka under the EFF program in June this year releasing the next tranche amounting to US$ 252 million. Sri Lanka sought the assistance of the IMF to support the depleting balance of payment in 2016.