Govt. awaits favourable IMF response for second tranche of EFF this week

 Cabinet Co-Spokesman and Minister Bandula Gunawardena

•  Cabinet co-spokes Minister Bandula Gunawardena says process of evaluating progress made by Sri Lanka is complex, takes days for IMF Board members to reach a consensus
•  Acknowledges Govt. exploring alternative ways to source funds without further burdening taxpayers 
•  Asserts difficulty for Govt. to manage cash flow having to pay salaries, pension and welfare Bills of over 1.4 m people monthly

By Charumini de Silva

The Government yesterday expressed optimism of a positive response from the International Monetary Fund (IMF) this week to receive the second tranche of the $ 2.9 billion Extended Fund Facility (EFF).  

Speaking at the post-Cabinet meeting media briefing yesterday Cabinet Co-Spokesman and Minister Bandula Gunawardena said that while the IMF mission commended some restructuring efforts and unpopular reforms, concerns lingered regarding three crucial areas: Government revenue generation, foreign reserves and assets, and the implementation of the Anti-Corruption Bill.   “The process to evaluate the progress made by Sri Lanka is a complex procedure and it takes a few days for the IMF mission to inform its Board members to reach a consensus,” he pointed out. 

Gunawardena said the Government is working on increasing its revenue to the GDP, by exploring alternative ways to source the necessary funds noting that they cannot further burden the taxpayers for it. 

“Sri Lanka is the only country that is spending three-quarters of its entire revenue on salaries, pensions and welfare benefits,” he claimed. 

“Despite increasing taxes and introducing new taxes the Government has been able to collect only Rs. 1,751 billion and of that, Rs. 1,265 was spent for salaries and pensions, which accounts for 72% of the total tax revenue. In addition, Rs. 506 billion or 28% of total revenue was spent on Samurdhi and other welfare benefits. In addition, Rs. 1,565 billion was spent for debt interests and Rs. 715 million for capital expenditure,” he explained. 

He pointed out that it was very difficult for the Government to manage the cash flow even after reducing much of its expenditure without having to deal with salaries and pensions of over 1.4 million people monthly. 

However, Gunawardena said it was important to bring financial discipline into the system to put the economy back on a sustainable footing till 2048 to overcome the vicious economic cycle. 

“We have managed to build up our reserves from zero in May 2022 to $ 3.8 billion gradually at present. More initiatives have been put into place to further boost the reserves and foreign assets,” he said. 

He also hoped that the Commission members would soon be appointed for the Anti-Corruption Bill to be fully implemented. The Bill was passed in Parliament and was endorsed by the Speaker on 15 September. 

“It is important that we remember that this implementation and evaluation procedure takes time and effort. These cannot be done as fast as we think. This is why Sri Lanka has not received the second tranche from the IMF yet. However, the Government is confident of receiving positive feedback from the IMF this week,” he said.