Governor of the Central Bank of Sri Lanka (CBSL), Dr. Nandala Weerasinghe, underscored the vital importance of maintaining the continuity of the Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF).
Speaking at a special briefing on the afternoon of December 29, Dr. Weerasinghe elucidated that the EFF program should persist for the next four years, irrespective of the governing body, to secure the required debt relief and international financial support.
He cautioned against unilateral withdrawal from the IMF-EFF agreement, emphasizing the severe implications it would entail.
Dr. Weerasinghe addressed a press briefing convened at the Central Bank premises on the Financial Stability Review (FSR) of 2023.
The recently released CBSL report on FSR for 2023 highlighted expectations of the dissipation of existing macro-financial vulnerabilities in the period ahead, with anticipated improvements in the macroeconomic front. However, the report emphasized that continued progress along the policy reforms agenda outlined in the IMF-EFF agreement is essential to guide the economy and financial system toward stable grounds.
In this context, the report stated, “Any deviation from this path would bring detrimental and irreversible consequences to the financial system and the economy, though moving along this arduous and narrow path is challenging. The instigation and operationalization of strong and appropriate frameworks that proactively address vulnerabilities and implementation of timely, well-sequenced, and consistent policies are also crucial to ensure the stability of the Sri Lankan financial system.
As the economy undergoes a monetary policy easing cycle, the credit cycle is expected to enter an expansionary phase, in which macroprudential concerns could build up. The Central Bank commits to monitoring these developments closely and implementing necessary policy actions to mitigate systemic risks and ensure financial stability through macroprudential interventions.”
