Sri Lanka to secure sixth tranche of $250 million IMF’s EFF
With one year more for the concl u s i o n of the International Monetary Fund’s (IMF’s) US$1.5 billion Extended Fund Facility (EFF) programme, Sri Lanka is waiting to receive the sixth tranche of $250 million of the loan facility soon.
With the disbursement of the sixth tranche, total disbursements under the EFF arrangement will be $1.26 billion, Central Bank sources said.
The sixth tranche disbursement is conditional on the completion of the fifth review of the Extended Fund Facility by the IMF Executive Board, Manuela Goretti head of the IMF staff team who visited Sri Lanka said.
In an email communiqué, she revealed to the Business Times that continuation of the EFF would help the country to strengthen external resilience and improve macroeconomic stability, thereby supporting the achievement of medium term economic growth, while enhancing market confidence, she revealed.
Sri Lanka has met crucial milestones in terms of structural reforms including the introduction of an automatic fuel-pricing formula and the implementation of the Inland Revenue Act and Central Bank’s Roadmap for flexible inflation targeting.
Robust implementation of the new Inland Revenue Act is critical for Sri Lanka to make space for essential social services and growth-enhancing capital spending such as infrastructure investment, while sustaining fiscal consolidation and improving the investment climate, she pointed out.
The Act promotes predictability and transparency of income taxes, aligning them with international best practices, and develops a level- playing field for investors.
“As with any major reforms, we understand the challenges that implementing such a fundamental revamp of the tax system entails and continue to be available to support through technical assistance the authorities’ efforts to modernise business processes in revenue administration,” she added.
An IMF mission visited Colombo during September 13-27 to discuss progress of the economic reform programme. The mission made significant progress towards reaching a staff-level agreement with the government on completing the fifth review.
Discussions were expected to continue during the Annual Meetings of the IMF and World Bank in Bali Nusa Dua, Indonesia this month (October 12 to 14).
When a country borrows from the IMF, it commits to undertake policies to overcome its economic and structural problems.
Sri Lanka has made considerable progress on fiscal consolidation, reaching a primary surplus in 2017, she said adding that given still high public debt and large financing needs, it is critical that the authorities’ fiscal efforts continue to strengthen Sri Lanka’s resilience to external shocks and domestic uncertainty in the run-up to the elections.
These efforts can be supported by strong policy frameworks and institutions, she pointed out while welcoming the authorities’ commitment to upgrade the country’s fiscal rules to lock in the hard-won gains in fiscal consolidation and place public debt firmly on a downward path, as well as their ongoing efforts to modernise custom and revenue admin- istration to strengthen tax compliance.
The authorities are taking important steps to tackle the still substantial fiscal risks posed by SOEs. The introduction of Statements of Corporate Intent ( SCIs) for 5 major SOEs with biannual compliance reports and the approval of an automatic fuel pricing formula are landmark initiatives.
“To further strengthen governance of SOEs and mitigate fiscal risks, we encourage the introduction of an automatic pricing mechanism for electricity and timely publication of SOE audited financial statements to further enhance transparency on contingent fiscal liabilities,” she said
The IMF also welcomed the authorities’ commitment to restructure Sri Lankan Airlines, with support from an expert consulting firm, to place the airline on a sound financial and operational footing.