IMF approves US$164 million 7th tranche of EFF for Sri Lanka

IMF approves US$164 million 7th tranche of EFF for Sri Lanka

2 November 2019 06:16 pm

The International Monetary Fund (IMF) yesterday (01) completed the Sixth Review of Sri Lanka’s economic performance under the program supported by an extended arrangement under the Extended Fund Facility (EFF).

The IMF, in a statement, said the completion of the Sixth review, upon the granting of a waiver of nonobservance for the end-June 2019 performance criterion on the primary balance, enables the disbursement of SDR 118.5 million (about US$164 million), bringing total disbursements under the arrangement to SDR 952.23 million (about US$1.31 billion).

Sri Lanka’s extended arrangement was approved on June 3, 2016, in the amount of about SDR 1.1 billion (US$1.5 billion, or 185 percent of quota in the IMF at that time of approval of the arrangement.

On May 13, 2019, the Executive Board approved an extension of the arrangement by one additional year, until June 2, 2020, with re-phasing of remaining disbursements.

Following the Executive Board’s discussion of the review,Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the Board noted that the Sri Lankan economy is gradually recovering from the impact of the Easter Sunday terrorist attacks.

Growth is projected to strengthen to 3.5 percent in 2020, from 2.7 percent in 2019, as tourist arrivals and related activities gradually recover.

Sustaining fiscal policy discipline remains critical to strengthen resilience and support growth, as important downside risks remain, amid heightened external and domestic uncertainty, he added.

“The authorities are taking actions to mitigate the revenue shortfalls caused by the terrorist attacks and preserve the hard-won gains made under the program, IMF Deputy Managing Director said.  

Sustained efforts to mobilize revenues will be needed in 2020 to place public debt on a downward path while preserving space for critical social and investment spending.

The new fiscal rule framework and the establishment of an independent public debt management agency over the medium term will help anchor public debt sustainability.

Advancing SOE reforms in the electricity sector will also be critical to reduce fiscal risks, he disclosed.