- Last Update 2024-07-18 10:32:00
IMF delegation says talks will continue virtually towards reaching a staff-level agreemen
The IMF delegation that concluded its visit to Sri Lanka today said discussions will continue virtually towards reaching a staff-level agreement on an Extended Fund Facility (EFF) "in the near future".
"Because public debt is assessed as unsustainable, [IMF] Executive Board approval would require adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored," an end-of-mission statement cautioned.
“In this context, discussions focused on designing a comprehensive economic program to correct the macroeconomic imbalances, restore public debt sustainability, and realize Sri Lanka’s growth potential," it said.
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, the statement pointed out.
"Given the low level of revenues, far-reaching tax reforms are urgently needed to achieve these objectives," it said. "Other challenges that need addressing include containing rising levels of inflation, addressing the severe balance of payments pressures, reducing corruption vulnerabilities and embarking on growth-enhancing reforms."
The team was led by Messrs. Peter Breuer and Masahiro Nozaki from June 20 to 30, 2022. They discussed IMF support for Sri Lanka and the authorities’ comprehensive economic reform program. Ms. Anne-Marie Gulde-Wolf, Deputy Director of the IMF’s Asia and Pacific Department, participated in policy discussions.
"The objectives of the new IMF-supported program would be to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential," it said.
The IMF team affirmed that Sri Lanka was going through a severe economic crisis. The economy is expected to contract significantly this year, while inflation is high and rising.
The critically low level of foreign reserves has hampered the import of essential goods. "During the in-person visit, the team witnessed some of the hardships currently faced by the Sri Lankan people, especially the poor and vulnerable who are affected disproportionately by the crisis," the statement said. "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 other actions since early April were important first steps to address the crisis," it said. "The team had constructive and productive discussions with the Sri Lankan authorities on economic policies and reforms to be supported by an IMF Extended Fund Facility (EFF) arrangement."
“The authorities’ monetary, fiscal policy and other actions since early April were important first steps to address the crisis," it said. "The team had constructive and productive discussions with the Sri Lankan authorities on economic policies and reforms to be supported by an IMF Extended Fund Facility (EFF) arrangement."
The staff team and the authorities made significant progress on defining a macroeconomic and structural policy package. There has also been considerable progress by Sri Lankan officials in formulating their economic reform program. The IMF said it looks forward to continuing the dialogue with them.
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