In a recent development, the International Monetary Fund (IMF) has lauded Sri Lanka for achieving significant milestones in steering its debt towards sustainability. Peter Breuer, Senior Mission Chief for Sri Lanka, affirmed that Sri Lanka’s agreements-in-principle with the Official Creditors Committee and the Export-Import Bank of China regarding debt treatments align with program targets.
During an online press briefing on Wednesday morning, Breuer emphasized the importance of finalizing Memoranda of Understanding between Sri Lankan authorities and official creditors. He highlighted that the timely implementation of these agreements, coupled with resolving issues with external private creditors, is crucial for restoring Sri Lanka’s debt sustainability over the medium term.
Responding to queries, Breuer stressed the need to convert agreements-in-principle into concrete agreements. He noted that official sector agreements must be transformed into actual agreements, and the country should reach accords with commercial creditors.
Looking ahead, Breuer revealed the IMF’s plan to visit Sri Lanka next year, expressing hope for concluding the second review by the first half of 2024. “We expect to travel to Sri Lanka in March/April and conclude the review two months after that,” he announced.
The IMF Executive Board successfully completed the first review under the 48-month Extended Fund Facility with Sri Lanka, granting the country access to approximately US$337 million. This brings the total IMF financial support disbursed to around US$670 million out of the overall US$3 billion.
Breuer emphasized that transitioning from stabilization to a robust recovery hinges on maintaining reform momentum with strong ownership by Sri Lankan authorities and the broader population. He urged the authorities to build on their hard-won gains, emphasizing the need to advance revenue mobilization, align energy pricing with costs, strengthen social safety nets, rebuild external buffers, combat corruption, and enhance governance.
Breuer elaborated on the critical role of revenue administration reforms in recovering from program slippages and funding essential government services. He emphasized the Central Bank of Sri Lanka’s role in implementing a multi-pronged disinflation strategy to uphold the credibility of its inflation targeting regime. Additionally, accumulating reserves, supported by exchange rate flexibility, remains a priority under the Extended Fund Facility. Implementing the bank recapitalization plan and fortifying financial supervision and crisis management frameworks are deemed crucial to safeguarding financial sector stability. Breuer encouraged the authorities to remain steadfast in their reform commitments.
