Long road ahead for economic recovery

Sri Lanka has made slow steps in the long road ahead for its economy recovery and the visiting International Monetary Fund (IMF) team is still taking stock of the mess the country's economy is in.

The Government has fallen short of many goals including the revenue targets. When asked if this isn't a concern by the IMF, Peter Breuer, Senior Mission Chief for Sri Lanka, Asia and Pacific Department, IMF said, “So, that's the purpose of our visit here, that we are engaging with the Government to update our knowledge, find out what is the state of affairs, and to the extent that any corrective action is needed, we will discuss it with them. Again, there may be many things going on, some things that are under control of the Government, and other things that are not. This is really something that we will only be able to speak more about towards the end of our visit here.”

Economic analysts say that whatever the government does, it cannot escape three crucial aspects which are namely, restructuring state owned enterprises, reducing the primary balance deficit and reducing the total government debt.

The authorities are making good faith efforts to negotiate with all the creditors, both private creditors and official creditors, Krishna Srinivasan, Director of Asia and Pacific Department, IMF told media on Monday, noting that this engagement is going on quite well. “The expectation is that the restructuring exercise will be completed by the first review of the programme, which is in September or October of this year.”

To multiple questions on domestic debt restructuring, (DDR), he said that the IMF's role in any debt restructure is that it defines the macro framework, the debt targets. “We don't get involved, per se, in any of the debt research and negotiations defining the perimeter of debt. That said, any kind of restructuring will need to keep into account to make sure that the financial stability is assured.”

Mr. Breuer said

Sri Lanka is the first country in Asia to do the IMF diagnostic at the request of the authorities. The Governance Diagnostic Exercise will identify key governance weaknesses and corruption vulnerabilities that are macro-economically critical and it'll be across six key areas.