The International Monetary Fund (IMF) Executive Board has completed the third review of Sri Lanka’s Extended Fund Facility arrangement, which enables the disbursement of about USD 251.4 million.
While the authorities met fiscal targets and legislated the income tax reform, further consolidation is necessary, given Sri Lanka’s high debt burden and large gross financing needs.
Further buildup of international reserves under greater exchange rate flexibility will help reduce Sri Lanka’s external vulnerability.
On December 6, 2017, the Executive Board of the International Monetary Fund (IMF) completed the third review of Sri Lanka’s economic performance under the program supported by a three-year extended arrangement under the Extended Fund Facility (EFF) arrangement.
Completion of the review enables the disbursement of the equivalent of about USD 251.4 million, bringing total disbursements under the arrangement to the equivalent of about USD 759.9 million.
Sri Lanka’s three-year extended arrangement was approved on June 3, 2016, in the amount of about USD1.45 billion, or 185 percent of quota in the IMF at that time of approval of the arrangement.
The government’s reform program, supported by the IMF, aims to reduce the fiscal deficit, rebuild foreign exchange reserves, and introduce a simpler, more equitable tax system to restore macroeconomic stability and promote inclusive growth.
Acting Chair and Deputy Managing Director, Mitsuhiro Furusawa said Sri Lanka’s performance under the Fund-supported program has remained broadly on track since the second review.
“The authorities remain committed to the economic reforms under the program and have undertaken measures to improve government revenue and accumulate international reserves. Going forward, it is important to build on the progress made and accelerate reforms to further reduce fiscal and external vulnerabilities,” he said.