SL’s new IMF-backed economic reforms get underway
Sri Lanka’s a new International Monetary Fund (IMF)-backed economic reforms programme agreed upon at the staff level by the IMF and Central Bank teams is aimed at restoring macroeconomic stability and debt sustainability, the IMF team of negotiators said.
Addressing a media conference in Colombo on Thursday, senior IMF mission chief Peter Breuer noted that it will safeguard financial stability while stepping up structural reforms. The IMF has projected a contraction of 8.7 per cent in the country’s economy this year warning that it would impact the poorest of the poor and vulnerable communities disproportionately.
Mr. Breuer also noted that said the Sri Lanka government should enter into a settlement as early as possible with creditors in order to overcome the economic crisis and achieve debt sustainability.
He categorically stated that that the IMF will not be involved in negotiations between creditors and Sri Lanka and it will remain neutral.
Mr. Breuer expressed the belief that Sri Lanka’s debt restructuring process could be expedited now following the Staff-Level Agreement between the IMF and the government authorities giving assurance to creditors that it is strictly adhering to economic reforms to tackle corruption and achieve the country’s economic growth.
The interim budget 2022 presented in Parliament on Tuesday has taken the initial step towards this end, he said adding that Sri Lanka’s budget 2023 should be in accordance with the economic reforms programme and macroeconomic framework under the IMF programme.
He said that all those creditors should agree to ensure to debt sustainability but if a single creditor disagrees with the ongoing process, Sri Lanka’s economic crisis would deepen.
The assurance of all creditors including China on debt restructuring is essential prerequisite for the IMF to get the Executive Board endorsement and begin the disbursement of tranches of the 4-year Extended Fund Facility of US$ 2.9 billion, he explained.
“Sri Lanka is in a special situation that much of its official debt is outside Paris Club creditors,” Mr. Breuer said.
“An important pillar is to restore a market-determined exchange rate,” Mission chief Masahiro Nozaki said adding that: “We believe it needs to be sequenced. The announcement of a comprehensive programme will be important.”
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