A discussion with the Sri Lankan authorities and the official creditors of Sri Lanka was held yesterday (03) through online technology under the chairmanship of the Secretary of the Ministry of Treasury and Finance – Mahinda Siriwardena and the Governor of the Central Bank of Sri Lanka – Nandalal Weerasinghe.
Sri Lanka is fully committed to proceeding fairly and transparently with all creditors. The meeting is another important step in securing board approval for the IMF program.
“Sri Lanka is at a critical stage and we hope to get approval from the International Monetary Fund as soon as possible to restore macroeconomic stability. We are grateful to our bilateral partners for their continued support in this process. The IMF program and our targeted economic reforms will restore public debt sustainability and this will help protect the most vulnerable and restart our growth process.This government is focused on restoring social and economic prosperity. The focus is also on ensuring our citizens have access to critical public services.” Minister of State for Finance Shehan Semasinghe who commented on this discussion.
The Governor of the Central Bank of Sri Lanka, Dr. P. Nandalal Weerasinghe, who spoke here said that,
“The IMF program and economic reform agenda will restore Sri Lanka’s financial security. I would like to thank the Official Creditors for joining us in this productive meeting where we had the opportunity to discuss the current financial situation in Sri Lanka and the progress of reforms.
On September 1, 2022, Sri Lanka reached a staff-level agreement with the International Monetary Fund (IMF) for a four-year program supported by the Extended Fund Facility. The US$2.9 billion program aims to promote macroeconomic stability and credit recovery, while protecting the vulnerable and safeguarding the sustainability and financial system of Sri Lanka. This agreement is subject to the approval of the Executive Board of the International Monetary Fund.
The IMF program is centered around targeted reforms in Sri Lanka. The government’s reform agenda is based on four points:
The first issue is fiscal reform. The program envisages the implementation of targeted revenue-based fiscal consolidation measures, combined with revenue administration reforms, and the introduction of a fuel and electricity pricing mechanism to mitigate financial risks arising from state-owned enterprises. It also includes improving the existing social safety net to protect the most vulnerable community.
The second point is to restore public debt sustainability. Sri Lanka’s debt situation has been deemed unsustainable by the International Monetary Fund and has been addressed through an extended credit facility.
Third, the program aims to restore price stability and rebuild external security. An Act modernizing the policy framework to strengthen the independence of the Central Bank of Sri Lanka is to be passed soon.
A Central Bank Act that will strengthen independence and modernize its policy framework is expected to be approved by the Cabinet soon.
The fourth point of the program is to protect the stability of the financial system, which is a key condition for the revival of Sri Lanka’s economy. This will be achieved by ensuring that Sri Lanka’s banking system is adequately capitalized and by strengthening the resilience and governance of its state-owned banks.
In addition to these, the government will introduce a series of anti-corruption reforms that will bring Sri Lanka’s legal framework in line with international standards and implement comprehensive structural reforms to unlock Sri Lanka’s growth potential.”