IMF calls for crucial policy and security actions to shield the economy

While expressing shock and sorrow on the horrific terror attacks in Sri Lanka, the International Monetary Fund (IMF) called for crucial policy and security measures by the authority’s towards the country’s economic stability specially to shore up tourism.

Tourism which accounts for 5 per cent of GDP needs to be re-invigorated to build on the strong performance of recent years, Manuela Goretti, IMF Mission Chief for Sri Lanka told the Business Times in an e-mail response.

Initial financial market pressures seem to have been contained in the aftermath of the attacks. Decisive policy and security measures by the authorities will be important, in particular for tourism, she pointed out.

Based on the important progress to date and the reform plans under the programme, the IMF Executive Board is expected to consider in mid-May the authorities’ request to complete the fifth review under the extended fund facility arrangement and extend it by one additional year until June 2020.

This will provide additional time for the authorities to anchor macroeconomic stability and complete Sri Lanka government’s economic reform agenda, she added.

The 2019 budget approved in early April strikes a good balance between advancing revenue-based fiscal consolidation, which is important to shore up market confidence given Sri Lanka’s high debt and refinancing needs, while making space for macro critical capital and social spending and business friendly tax measures, Ms. Goretti said.

A total of about $500 million remains to be disbursed under the EFF arrangement, she disclosed.

Subject to the IMF Board’s approval of the extension request, this is expected to be spread evenly into three tranches, over three reviews.

Accordingly, the amount of the next tranche for the completion of the fifth review is expected to be about $165 million.

The tranches for the sixth and seventh EFF reviews will be comparable in size and are expected to be disbursed in late 2019 and early 2020, subject to the completion of the respective reviews, she confirmed.