Issuing a statement on the latest political and economic developments in the country the International Monetary Fund (IMF) said it is closely observing the developments in Sri Lanka as it hopes to see a speedy solution to the current situation in the country to enable an environment for discussions on an IMF backed program.
IMF Senior Mission Chief for Sri Lanka Peter Breuer and IMF Mission Chief for Sri Lanka Masahiro Nozaki said, “We are closely monitoring the ongoing developments in Sri Lanka. We hope for a resolution of the current situation that will allow for resumption of our dialogue on an IMF-supported program, while we plan to continue technical discussions with our counterparts in the Ministry of Finance and Central Bank of Sri Lanka.”
The two officials noted that the IMF is deeply concerned about the impact of the ongoing economic crisis on the people, particularly the poor and vulnerable groups, and reaffirm our commitment to support Sri Lanka at this difficult time, in line with the IMF’s policies.
The global lender at the conclusion of its visit to Sri Lanka stated that the objectives of the new IMF supported program would be to restore macroeco nomic stability and debt sustainability, while protect ing the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.
An International Monetary Fund (IMF) mission team led by Peter Breuer and Masahiro Nozaki visited Colombo from June 20 to 30 to discuss IMF support for Sri Lanka and the authorities’ comprehensive economic reform program.
The post visit media statement stated ‘Significant progress was made, and discussions will continue virtually towards reaching a staff-level agreement on the EFF arrangement in the near term.Sri Lanka is going through a severe economic crisis. The econo my is expected to contract significantly in 2022, while inflation is high and rising. The critically low level of foreign reserves has hampered the import of essen tial goods. During the in-person visit, the team wit nessed some of the hardships currently faced by the Sri Lankan people, especially the poor and vulnera ble who are affected disproportionately by the crisis. We reaffirm our commitment to support Sri Lanka at this difficult time in line with the IMF’s policies.’
“The authorities’ monetary, fiscal policy and oth er actions since early April were important first steps to address the crisis. The team had constructive and productive discussions with the Sri Lankan authori ties on economic policies and reforms to be sup ported by an IMF Extended Fund Facility (EFF) arrangement. The staff team and the authori ties made significant progress on defining a macro economic and structural policy package. The discus sions will continue virtually with a view to reaching a staff-level agreement on the EFF arrangement in the near term. Because public debt is assessed as unsus tainable, Executive Board approval would require adequate financing assurances from Sri Lanka’s cred itors that debt sustainability will be restored.
“In this context, discussions focused on design ing a comprehensive economic program to correct the macroeconomic imbalances, restore public debt sustainability, and realize Sri Lanka’s growth poten tial. Discussions advanced substantially during the mission, including on the need to reduce the elevated fiscal deficit while ensuring adequate protection for the poor and vulnerable. Given the low level of reve nues, far-reaching tax reforms are urgently needed to achieve these objectives. Other challenges that need addressing include containing rising levels of infla tion, addressing the severe balance of payments pressures, reducing corruption vulnerabilities and embarking on growth-enhancing reforms. The authorities have made considerable progress in for mulating their economic reform program and we are looking forward to continuing the dialogue with them, the lender noted.