IMF reaches staff-level agreement on second review of Sri Lanka’s Extended Fund Facility

Washington, DC: After constructive discussions with Sri Lankan authorities during the visit to Colombo in March, and more recently during the Spring Meetings, the International Monetary Fund (IMF) has reached a staff-level agreement on the second review under an economic reform program supported by a three-year Extended Fund Facility arrangement.

“The IMF team reached a staff-level agreement with Sri Lankan authorities on the second review under an economic reform program supported by a three-year Extended Fund Facility arrangement, subject to the completion of a prior action by the authorities and the approval of the IMF Executive Board,” said the IMF staff team issuing a statement in Washington, DC.

The board is expected to consider Sri Lanka’s request for completion of the second review in June 2017, by which time the new Inland Revenue Act is expected to be submitted to Parliament as a prior action. “The new law should pave the way for a durable fiscal consolidation based on revenue mobilisation - a key pillar of the Government’s reform program,” it said.

The team commended the authorities for resuming accumulating net international reserves as a corrective action for missing the end-2016 target. This reserve accumulation should continue and help reduce Sri Lanka’s external vulnerability, the team said.

The Sri Lankan authorities are making progress with their economic reform program, particularly on improving the fiscal position. Maintaining the reform momentum in an uncertain external environment will be important for addressing fiscal and external imbalances, according to the IMF.