IMF says Sri Lanka still to gain full economic recovery despite reform progress

The visiting International Monetary Fund (IMF) delegation has had constructive and productive discussions with the Sri Lankan authorities on economic performance and policies underpinning the first review under the IMF Extended Fund Facility (EFF) arrangement.

The people of Sri Lanka have shown remarkable resilience and the authorities have made significant progress on important reforms, IMF mission team leader Peter Breuer told a media conference in Colombo on Wednesday.

However he noted that despite early signs of stabilisation, full economic recovery is not yet assured.

"Growth momentum remains subdued, with Q2 real GDP contracting by 3.1 per cent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months," said Mr. Breuer

Discussions will continue towards reaching a staff-level agreement in the near term that will maintain the reform momentum needed to allow Sri Lanka to emerge from its deep economic crisis, he disclosed.

The objectives of the IMF-supported programme will continue to focus on restoring 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.

The IMF visited Colombo from September 14 to 27, 2023 to discuss economic and financial policies to support the approval of the First Review of the programme under the EFF arrangement.

The efforts (by the government) are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 per cent in September 2022 to below 2 per cent in September 2023, gross international reserves increased by US$1.5 billion during March-June this year, and shortages of essentials have eased.

He added that sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth.

The IMF team had constructive and productive discussions with the Sri Lankan authorities on economic performance and policies underpinning the first review under the IMF Extended Fund Facility (EFF) arrangement.

The objectives of the IMF-supported program will continue to focus on restoring 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.