In a press briefing today, Peter Breuer, Senior Mission Chief for Sri Lanka at the International Monetary Fund (IMF), announced the release of $337 million in additional funding for the island nation. This brings the total IMF support under the 48-month Extended Fund Facility to $670 million, part of a crucial $3 billion bailout package aimed at stabilizing Sri Lanka’s ailing economy.
Acknowledging Progress: Breuer commended the Sri Lankan authorities for implementing “challenging policy actions” that have begun to bear fruit. These include rapid disinflation, significant revenue-based fiscal adjustments, and a steady build-up of reserves. He noted that all quantitative performance criteria for the first review were met, except for one related to expenditure arrears, and most structural benchmarks were implemented on time or with minor delays.
Challenges Remain
Despite the positive progress, Breuer cautioned that sustaining the reform momentum is crucial for a full and swift recovery. He urged the authorities to:
Boost tax revenue: Reenforce revenue-based fiscal consolidation with reforms to avoid program slippages and ensure adequate funding for essential government services.
Align energy pricing: Reflect costs in energy pricing to improve efficiency and budget sustainability.
Strengthen social safety nets: Expand and improve targeting mechanisms to ensure effective support for the poor and vulnerable.
Safeguard financial stability: Implement the bank recapitalization plan and strengthen financial supervision frameworks.
Finalize debt restructuring: Sign Memoranda of Understanding with creditors and reach agreements with external private creditors to restore debt sustainability.
Transparency and Governance: Breuer commended Sri Lanka’s publication of the first-ever “Governance Diagnostic Report” in Asia, calling it a “commendable step” towards improved transparency and accountability. He encouraged continued commitment to implementing the report’s recommendations to deliver tangible economic gains for Sri Lankan citizens.
Future Collaboration
The IMF reaffirmed its commitment to supporting Sri Lanka’s continued efforts, offering assistance with creditor coordination and program implementation. Breuer concluded by thanking the Sri Lankan authorities for their dedication and expressing the IMF’s optimism for continued close collaboration.
Source: Peter Breuer, Senior Mission Chief for Sri Lanka, International Monetary Fund (IMF) Press Briefing, December 12, 2023.
