The International Monetary Fund (IMF) yesterday praised the government on its fiscal performance.
It said that the “performance under the programme has remained broadly on track since the second review despite a series of weather related shocks”.
This was also reflected in the country achieving a Rs 21.9 billion surplus in the primary balance of the fiscal accounts during the first 10 months of the year 2017, for the first time in 63 years.
Releasing its staff report pertaining to the third review of the Extended Arrangement under the Extended Fund Facility with Sri Lanka yesterday, the Fund looked at Sri Lanka’s performance over the three year term of its Extended Fund Facility (EFF) which started in June 2016.
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 and thereafter enabled the disbursement of US$ 251.4 million, bringing total disbursements under the arrangement to the equivalent of US$ 759.9 million.
The staff review however warned that Sri Lanka was still vulnerable to shocks, given its high level of debt and high debt repayments starting this year. They asked that the Central Bank on the monetary policy front maintain a ‘tightening bias’ to contain inflation and rein in credit growth, especially private sector credit growth which still remained high.
The IMF also observed that structural reforms in State Owned Enterprises was still slow, and that it was important that the government take steps in restructuring important SOEs; such as the national carrier. The need for standard energy pricing, in the form of an energy/fuel formula was also highlighted by the IMF.
The government last year announced that they would finalise an energy pricing formula by March of this year. “It is important to build on the progress made and accelerate reforms to reduce fiscal and external vulnerabilities”, noted the IMF in their release.
Further identifying risks to the economy, the IMF noted, “Political cohesion of the coalition government may be strained in the run-up to the 2020 national elections”- a risk both to the economy and EFF programme.