The International Monetary Fund (IMF) Executive Board has given the green light for the release of the second tranche of financial assistance to Sri Lanka, marking a pivotal moment in the nation’s economic reform journey. The decision came after the successful completion of the first review under the 48-month Extended Fund Facility (EFF) Arrangement, demonstrating Sri Lanka’s commitment to implementing robust economic policies and reforms.
This latest move allows Sri Lanka access to an immediate disbursement of SDR 254 million (approximately US$337 million), bringing the total disbursed under the EFF program to a substantial SDR 508 million (about US$670 million). The EFF Arrangement, approved on March 20, 2023, amounts to SDR 2.286 billion (approximately US$3 billion), aiming to provide crucial support for Sri Lanka’s efforts in restoring macroeconomic stability, ensuring debt sustainability, and fostering growth-oriented structural reforms.
Kenji Okamura, Deputy Managing Director of the IMF, expressed satisfaction with Sri Lanka’s performance under the program. At the end of June, all but one quantitative performance criteria were met, highlighting the nation’s commitment to meeting key targets. Notably, Sri Lanka has become the first country in Asia to undergo the IMF Governance Diagnostic exercise, publishing the Governance Diagnostic Report as part of the reform process.
In his statement,Okamura emphasized the positive indicators of economic stabilization in Sri Lanka, including rapid disinflation, fiscal adjustments driven by revenue, and the rebuilding of reserves. The nation’s agreements-in-principle with the Official Creditors Committee and Export-Import Bank of China on debt treatments were recognized as significant milestones aligning with EFF targets, putting Sri Lanka on the path toward sustainable debt management.
While acknowledging the commendable progress, Mr. Okamura outlined key priorities for Sri Lanka’s continued economic recovery. These priorities include advancing revenue mobilization, aligning energy pricing with costs, strengthening social safety nets, rebuilding external buffers, eradicating corruption, and enhancing governance.
The Deputy Managing Director stressed the importance of sustaining the reform momentum and urged the Central Bank of Sri Lanka to remain focused on its disinflation strategy. Additionally, the implementation of the bank recapitalization plan and the strengthening of financial supervision and crisis management frameworks were highlighted as crucial for safeguarding financial sector stability.
Okamura also emphasized the need to reinforce social safety nets and protect social spending to support the vulnerable segments of society during Sri Lanka’s economic recovery. The IMF remains committed to assisting Sri Lanka in achieving its economic goals and ensuring stability and growth.