The International Monetary Fund officially announced today (September 1) that a staff-level agreement was reached between Sri Lanka and the International Monetary Fund.
Accordingly, Sri Lanka will be provided with comprehensive funding facilities of US$ 2.9 billion under a 48-month program from the International Monetary Fund.
The delegation of the International Monetary Fund (IMF) led by Peter Brewer and Masahiro Nozaki arrived in Sri Lanka on August 24, where they discussed the support of the International Monetary Fund needed by Sri Lanka and the comprehensive economic reform program of the Sri Lankan authorities, this was announced today.
Peter Brewer and Masahiro Nozaki stated that it will support Sri Lanka’s program to restore macroeconomic stability and credit sustainability while protecting the country’s financial stability, reducing corruption risks and unlocking the country’s growth potential.
Accordingly, the agreement is to be submitted for the approval of the Management and Executive Board of the International Monetary Fund in the near future.
Below are the main features of the IMF program in Sri Lanka.
Raising fiscal revenue to support fiscal consolidation. The program will implement major tax reforms, starting with the lowest income levels in the world. These reforms include revising the personal income tax and broadening the tax base for corporate income tax and VAT. The program aims to achieve a primary surplus of 2.3 percent of GDP by 2024.
Introduction of cost-recovery based pricing for fuel and electricity to reduce financial risks arising from state-owned enterprises.
The IMF team acknowledged the significant revenue measures and energy price reforms already announced by the authorities.
Mitigating the impact of the current crisis on the poor and vulnerable by increasing social spending and improving the coverage and targeting of social safety net programs.
Restoring price stability through data-driven monetary policy actions, fiscal consolidation, de-fiscalization and strengthened central bank autonomy that allows for a flexible inflation-targeting regime. A new Central Bank Act is a key element of this strategy.
Rebuilding foreign reserves through the restoration of a market-determined and flexible exchange rate supported by the comprehensive policies under the programme.
Protect financial stability by ensuring a sound and adequately capitalized banking system and improving financial sector safeguards and regulatory standards with a revised Banking Act.
Reduce corruption risks by improving financial transparency and public financial management, introducing a strong anti-corruption legal framework, and deepening governance monitoring through IMF technical assistance.
