Sri Lanka secures $315 m IMF tranche despite data slip
In a huge boost to Sri Lanka’s ongoing economic recovery effort, the International Monetary Fund (IMF) has authorised the release of a US$315 million tranche from the Extended Fund Facility (EFF), despite the recent reviews revealing government expenditure arrears that went unreported.
During a Washington media conference on Thursday, IMF Mission Chief to Sri Lanka Evan Papageorgiou revealed that the IMF Executive Board approved the Fourth Review of Sri Lanka’s EFF arrangement, increasing total disbursements to approximately $1.75 billion.
The approval followed two important Board-level decisions, one of which was approval of a waiver for Sri Lanka’s non-observation of an important quantitative performance criterion (QPC) on government fiscal arrears.
In a routine budget review, IMF staff noted that Sri Lanka had inadvertently underestimated government expenditure arrears data in three successive program reviews.
This violated the zero-ceiling QPC on arrears and infringed on the duty of the authorities to provide accurate fiscal information under Article 8, Section 5 of the IMF’s Articles of Agreement.
Mr. Papageorgiou said that among the principal causes of the discrepancy was a senior citizens’ interest subsidy programme that expired in 2022.
While debts from such and other schemes had been separately published by the Finance Ministry, they had not been reported under technical memorandum requirements of the Fund.
Communication gaps between line ministries and the central finance authority were also responsible for the breakdown in reporting.
Despite this, the IMF further stated that the Sri Lankan authorities acted quickly with corrective actions. They presented updated and comprehensive details of arrears and initiated a plan for arrears clearance.
In addition, the authorities committed themselves to enhancing data reporting mechanisms with IMF technical support, he revealed.
Significantly, the IMF Board determined that the underreporting was inadvertent and acknowledged the authorities’ proactive steps.
As such, a waiver for non-observance of the QPC was granted, allowing the review to pass through and the money to be released.
The IMF highlighted that the Fourth Review showed overall program performance was robust. All end-March 2025 quantitative targets—except for the expenditure arrears—were met.
The authorities also implemented two important prior actions: the restoration of cost-reflective electricity pricing and the implementation of an automatic electricity tariff adjustment mechanism.
In addition, structural adjustments which have to-be-finalised during end-May 2025-were either completed or under way, reflecting a solid commitment to the whole economic reform programme.
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