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Amidst concerns, IMF team coming two weeks after polls
View(s):An International Monetary Fund (IMF) delegation will arrive in Sri Lanka two weeks after the presidential election is concluded to make an assessment for a new staff-level agreement and review the ongoing programme.
They will meet with the elected president and discuss any changes that the administration hopes to propose to the ongoing IMF programme, Finance Ministry officials said.
“One of their main concerns is the country’s political stability, without which the economy will not be stable. They have some concerns regarding the interim period between the conclusion of the presidential election and the general election,” a senior official said.
Treasury officials have also done an assessment on various scenarios to expect after the conclusion of the presidential election. They have studied in detail the manifestos of the main candidates and summarised how political developments could create an unfavourable situation for the continuity of the IMF programme.
Among these are concerns that the increase in the budget deficit of more than 11 percent of GDP due to tax cuts and excessive expenditures would pose difficulties in the preparation of the budget in line with the agreements with the IMF under the Extended Fund Facility (EFF), the Treasury officials said.
The assessment says that a situation created where there is a substantial primary deficit from 3% to 4% of GDP could be a serious violation of the IMF programme.
The assessment also voices concern over disruption to the ongoing agreements reached with external creditors under the debt restructuring process as well as fiscal imbalances that could have direct and indirect implications on the currency as well.
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