IMF com­pletes fifth re­view; re­leases US$ 164.1mn to SL

Daily Mirror (Sri Lanka) - - MIRROR BUSINESS -

„IMF Ex­ec­u­tive Board also ap­proves one-year ex­ten­sion to cur­rent EFF „

Sri Lanka up to now has drawn US$ 1.15bn from US$ 1.5bn EFF en­tered in June, 2016 „

Says sus­tain­ing pol­icy dis­ci­pline re­mains crit­i­cal to strength­en­ing re­silience

„Urges to re­new ef­forts to strengthen gov­er­nance and trans­parency of SOES

„Tells Cen­tral Bank to con­tinue to pur­sue pru­dent data-de­pen­dent mone­tary pol­icy

The Ex­ec­u­tive Board of the In­ter­na­tional Mone­tary Fund (IMF) has ap­proved US$ 164.1 mil­lion dis­burse­ment for Sri Lanka, com­plet­ing the fifth re­view of the Ex­tended Fund Fa­cil­ity (EFF) ar­range­ment the is­land na­tion has with the mul­ti­lat­eral lender.

The Ex­ec­u­tive Board also ap­proved an ex­ten­sion of the ar­range­ment by one ad­di­tional year, un­til June 2, 2020 with the rephras­ing of re­main­ing dis­burse­ment.

Sri Lanka’s three-year ex­tended ar­range­ment was ap­proved on June 3, 2016. Un­der the US$ 1.5 bil­lion EFF ar­range­ment, Sri Lanka, up to now has drawn US$ 1.15 bil­lion, which in­cludes the lat­est dis­burse­ment.

Fol­low­ing the Ex­ec­u­tive Board’s dis­cus­sion of the re­view, IMF Deputy Man­ag­ing Di­rec­tor and

Act­ing Chair of the board, Mit­suhiro Fu­ru­sawa, ac­knowl­edged the ef­forts made by the Sri Lankan au­thor­i­ties to bring the IMF pro­gramme back on track af­ter the Oc­to­ber 26 po­lit­i­cal cri­sis that lasted for about 50 days. “The Sri Lankan au­thor­i­ties have suc­cess­fully brought the pro­gramme back on track, de­spite im­por­tant set­backs, by ad­vanc­ing fis­cal con­sol­i­da­tion through a well-tar­geted 2019 bud­get, re­build­ing re­serves, while main­tain­ing a pru­dent mone­tary pol­icy un­der greater ex­change rate flex­i­bil­ity and re­viv­ing struc­tural re­forms.

Sus­tain­ing pol­icy dis­ci­pline re­mains crit­i­cal to strengthen re­silience, given still siz­able pub­lic debt and low ex­ter­nal buf­fers, and sup­port strong and in­clu­sive growth,” Fu­ru­sawa said.

He also said sus­tained rev­enue mo­bi­liza­tion is needed to place pub­lic debt on a down­ward path, while mak­ing space for crit­i­cal pub­lic in­vest­ment and an ex­pan­sion of the so­cial safety net un­der well-de­fined se­lec­tion cri­te­ria.

“Strength­en­ing the se­lec­tion and ap­praisal process of large-scale in­vest­ment projects and as­sess­ing their fis­cal af­ford­abil­ity is crit­i­cal, given Sri Lanka’s high pub­lic debt.

“Stronger fis­cal rules and a medium-term debt man­age­ment strat­egy will sup­port medium-term fis­cal con­sol­i­da­tion and debt re­duc­tion ef­forts,” he said.

Fu­ru­sawa also stressed that Sri Lankan au­thor­i­ties should re­new their ef­forts to strengthen gov­er­nance and trans­parency of State-owned en­ter­prises, in­clud­ing the ad­vanc­ing a re­struc­tur­ing plan for Sri­lankan Air­lines and com­plet­ing en­ergy pric­ing re­forms.

Sri Lanka last year im­ple­mented a fuel pric­ing for­mula un­der the IMF loan prgramme.

Mean­while, Fu­ru­sawa urged that the Cen­tral Bank should con­tinue to pur­sue a pru­dent data-de­pen­dent mone­tary pol­icy while mak­ing ef­forts to build for­eign re­serves un­der greater ex­change rate flex­i­bil­ity to pro­tect the econ­omy against shocks.

He said the amend­ments to the Cen­tral Bank law will be a ma­jor step in the tran­si­tion to flex­i­ble in­fla­tion tar­get­ing.

To main­tain a sta­ble fi­nan­cial sys­tem, Fu­ru­sawa pointed out the need to har­mo­nize reg­u­la­tions and su­per­vi­sion of fi­nan­cial in­sti­tu­tions, strengthen the macro­pru­den­tial pol­icy frame­work, and en­hanc­ing the cri­sis pre­pared­ness tool­kit.

He fur­ther said the govern­ment’s ef­forts should fo­cus on lib­er­al­iz­ing trade, im­prov­ing the busi­ness en­vi­ron­ment and pro­mot­ing in­vest­ment, strength­en­ing gov­er­nance, en­cour­ag­ing fe­male and youth labour force par­tic­i­pa­tion, en­hanc­ing so­cial pro­tec­tion, and im­prov­ing cri­sis pre­pared­ness to nat­u­ral dis­as­ters.

The IMF Ex­ec­u­tive Di­rec­tors in their brief com­mu­niqué also ex­tended their con­do­lences to the govern­ment and Sri Lankan peo­ple for the loss of life and suf­fer­ing caused by the Easter Sun­day ter­ror at­tacks.

Mit­suhiro Fu­ru­sawa

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