International Monetary Fund’s (IMF) mission team recently concluded their visit, led by Senior Mission to Sri Lanka Chief Peter Breuer. The economic reform program supported by the IMF’s Extended Fund Facility (EFF) arrangement aims to analyze recent macroeconomic developments and progress in implementing economic and financial policies.
At the end of the mission, Breuer stated, “The economic reform program implemented by the Sri Lankan authorities is yielding commendable outcomes. The recovery continues with real GDP posting three consecutive quarters of expansion, and growth accelerating to 5.3 percent year-on-year in the first quarter of 2024.”
Accordingly, the IMF claims that with three quarters of real GDP growth, low inflation, higher revenue collection, and a rise in foreign reserves, the economic reforms carried out by the Sri Lankan government have continued to bolster the recovery. Additionally, A broad-based and steady economic recovery that benefits all Sri Lankans depends on the reform agenda making significant headway.
The economic reform program implemented by the Sri Lankan authorities is yielding commendable outcomes. In 2024, the recovery continues with real GDP posting three consecutive quarters of expansion, and growth accelerating to 5.3 percent year-on-year in the first quarter of 2024.
However, inflation remains contained below the Central Bank of Sri Lanka’s (CBSL) 5 percent target and domestic borrowing rates have declined. Gross international reserves increased by US$1.2 billion during the first half of 2024 and reached US$5.6 billion. The Fiscal revenue collections increased during the same period. The IMF declares these improvements are required to translate into better living conditions for the country.
Nevertheless, the Public Financial Management Act and the Public Debt Management Act, two important pieces of legislation, were recently approved by the parliament.
The IMF mission team further asserted that creating an integrated Public Debt Management Office and devising a comprehensive debt management plan will reduce the government’s financing risks.
Recently, the Banking Act was revised, and the accompanying implementing regulations were designed to help safeguard the financial system’s stability. The IMF states that in order for the financial sector to support economic growth, the government needs to make sure the banking industry is well capitalized.
The IMF further sheds light on, the Governance Diagnostic Report’s recommendations for governance improvements must be strictly followed in order to reduce corruption risks and encourage a departure from previous policy blunders. This includes giving priority to near-term promises made under the EFF program. To increase public trust and make these crucial initiatives easier to execute, it is imperative to create an atmosphere that is supportive of governance improvements.
Progress in meeting key commitments under the IMF-supported program will be formally assessed in the context of the third review of the Extended Fund Facility (EFF) arrangement
