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IMF gives another loan of US$ 162.6 million
View(s):The International Monetary Fund’s Executive Board on Friday completed the first review of Sri Lanka’s economic performance under a loan facility and has released SDR 119.894 million (about US$ 162.6 million) after expressing satisfaction of the performance.
The three-year facility under the Extended Fund Facility (EFF) arrangement was approved on June 3, 2016 for approved on June 3, 2016 for a total amount of about SDR 1.1 billion ($1.45 billion). The IMF’s statement at the end of Friday’s meeting said that with the latest disbursement the total so far would be SDR 239.788 million (about $325.1 million).
“The government’s reform programme, supported by the IMF, aims to reduce the fiscal deficit, rebuild foreign exchange reserves, and introduce a simpler, more equitable tax system to restore macroeconomic stability and promote inclusive growth,” an IMF statement said.
Economists in Colombo said the tax system presented in last week’s budget is in line with IMF expectations. The statement issued by Tao Zhang, Acting Chair and Deputy Managing Director of the IMF, said that Sri Lanka’s performance under the Fund-supported programme has been broadly satisfactory despite challenging circumstances. Macroeconomic and financial conditions has begun to stabilise, inflation trended down, and the balance of payments improved Meanwhile, international reserves remain below comfortable levels. It also said:
“Fiscal performance has been encouraging. The reinstatement of the amendments to the value added tax will help boost revenues. The 2017 budget proposal aims to strengthen government finances through revenue mobilisation, while guarding against revenue shortfalls by aligning spending with revenue on a quarterly basis.
“The new Inland Revenue Act scheduled for early next year should result in a more efficient, transparent, and broad-based tax system. Complementary structural reforms in tax administration, public financial management, and the governance and oversight of state-owned enterprises are critical for durable fiscal consolidation.
“While inflation has abated, credit growth remains strong. The Central Bank indicates its readiness to tighten the monetary policy stance further if inflationary pressures resurge or credit growth persists. The authorities intend to continue building up reserves through outright purchases while allowing for greater exchange rate flexibility.
“The banking sector is currently well capitalised. Steps are being taken to find a resolution mechanism for the distressed financial institutions. Going forward, there is a need to strengthen the supervisory and regulatory framework, and identify and mitigate vulnerabilities in the financial sector, particularly with regard to non-banks and state-owned banks.”