IMF releases much- awaited EFF third tranche
View(s):The International Monetary Fund (IMF) disbursed the third tranche of US$167.2 million from the $1.5 billion Sri Lanka’s Extended Fund Facility (EFF) this week granting a waiver of non-observance of the continuous performance criterion, an IMF media release revealed.
In completing the second review of EFF arrangement, the Executive Board of the IMF has waived off the country’s accumulation of external arrears which was missed due to continued difficulties of establishing a payment platform.
Continued international reserves accumulation and enhanced exchange rate flexibility, to which the authorities are committed, would reduce Sri Lanka’s external vulnerabilities, the IMF said.
It has also granted waivers of applicability of the performance criteria for end-June 2017 on floor of the central government primary balance and the programme net official international reserves of the Central Bank, given the unavailability of the information necessary to assess observance.
The IMF delayed the disbursement of the tranche until the Sri Lankan government tabled the new Inland Revenue Bill in Parliament.
“Legal experts of the IMF analysed the contents of the new draft bill on the Inland Revenue Act approved by the cabinet and they conducted discussions with the authorities before deciding on the completion of the second loan review in June,” it said.
The disbursement of the second tranche of the EFF had also been delayed till the passing of the VAT amendment draft bill in Parliament last year to increase it from 11 to 15 per cent.
Following the Executive Board’s discussion of the review, Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director said: “Sri Lanka’s performance under the Fund-supported programme has been broadly satisfactory. Macroeconomic and financial conditions have been stable, despite severe weather events and global market volatility.”
The authorities launched fundamental income tax reforms, undertook meaningful corrective actions to achieve programme targets on international reserves, and remain committed to the reform programme. Going forward, the reform momentum should strengthen further with greater ownership, building on the progress made so far, he added.
The new Inland Revenue Act, which has been submitted to Parliament, will support fiscal consolidation, make the tax system more efficient and equitable, and generate resources for social and development programmes, he pointed out.
Sri Lanka’s high debt burden and gross financing needs require further revenue-based consolidation, he said adding that timely progress in structural reforms, including tax administration and energy pricing, will strengthen the platform for durable consolidation.
“Inflation and credit growth remain on the high side. While monetary policy was tightened in March, further tightening is desirable until clear signs emerge that inflation pressures and credit expansion have subsided,” he added.