IMF delegation says Colombo's forex reserves short of target

A visiting delegation from the International Monetary Fund (IMF) has said that while there is substantial progress in stepping up revenue collection and automating revenue administration in Sri Lanka, net international reserves have fallen short of the target.

It also said, “progress on implementing structural benchmarks was somewhat uneven with some of the reforms lagging behind intended timelines. Accordingly, the mission and the authorities have discussed decisive actions to maintain the reform momentum in light of uncertain external environment”. The statement was issued on Tuesday at the end of a IMF staff visit to discuss progress of the economic reforms programme.

A delegation led by Jaewoo Lee visited Colombo during February 21-March 7 to hold discussions on the second review of the Sri Lankan authorities’ economic programme that is being supported by a three-year Extended Fund Facility (EFF). The mission met Prime Minister Ranil Wickremesinghe, Finance Minister Ravi Karunanayake and Governor of the Central Bank Indrajit Coomaraswamy among others. The statement said that discussions will continue in April in Washington DC during the spring meetings of the IMF and World Bank. 

It said: “The current account remained stable, but the financial account weakened with the resumption of capital outflows. A more prolonged drought could raise food and oil imports with adverse impact on growth, inflation, and the balance of payment.” 

“The mission commends the authorities for strong efforts in implementing their IMF-supported economic reform program with all fiscal quantitative targets through end-December being met. Substantial progress has been made in stepping up revenue collections and automating revenue administration, which has been the basis for meeting fiscal targets.”

“The mission encourages the Central Bank of Sri Lanka (CBSL) to remain vigilant in monitoring inflation pressures and stand ready to tighten monetary policy if inflation or credit growth does not abate. In light of mounting external pressures, the mission encourages the CBSL to take stronger actions towards rebuilding international reserves and maintaining exchange rate flexibility. In this regard, the mission and the authorities discussed IMF technical assistance to facilitate transition to flexible inflation targeting framework. 

“The mission also encourages the government to accelerate implementation of structural reforms in public financial management and state owned enterprises (SOEs), building on the substantial technical assistance received so far. In this regard, finalizing and publishing Statements of Corporate Intents for large SOEs is the first necessary step for enhancing transparency and accountability in the reform process. The mission also supports the ongoing work to design reforms in the business environment and competitiveness which are supported by a number of development partners.”  - ENDS -