IMF urges Sri Lanka to fast-track governance reforms before next tranche
The Government is compelled to speed up the implementation of governance reforms outlined in its action plan as it is crucial for the country giving priority to upcoming 2026 budget parameters to be in line with its External Fund Facility (EFF) program.
This will be a prior action before the IMF Executive board approves the Staff Level Agreement with the island nation’s authorities at present, IMF Mission Chief for Sri Lanka Evan Papageorgiou, told a media briefing in Colombo on Thursday after two-week discussions with authorities.
IMF staff and the Sri Lankan authorities have reached staff-level agreement on the Fifth Review under the 4-year Extended Fund Facility (EFF) arrangement Upon completion of the Executive Board review, Sri Lanka would have access to SDR 254 million (about US$347 million), bringing the total IMF financial support disbursed under the arrangement to SDR 1,524 million (about US$2.04 billion).
“Alongside that, we’re also judging the quality of the spending problems that are going to the budget. And this is something we have had a lot of discussions with the authorities, and we are keen and continue engaging with that,” he added.
Advancing procurement reforms, strengthening the framework, prioritising anti-corruption measures in revenue administration, including digitalisation, and implementation of electronic asset declarations will contribute to reducing corruption vulnerabilities.
The government must increase staffing at the independent CIABOC to tackle a backlog of complaints he said adding that recruitment at the Commission should be accelerated and it’s independence safeguarded in line with the Anti-Corruption Act. Structural reforms will be a key to lifting Sri Lanka’s potential growth.
“It is important for monetary policy to remain data-driven and to ensure price stability. Central bank independence should continue to be safeguarded, including by continuing to refrain from monetary financing of the budget. Efforts should continue to rebuild external buffers through reserve accumulation to adequate levels, while allowing for exchange rate flexibility,” he said.
“Programme performance is strong, underpinned by good fiscal revenue outcomes and improvements in external resilience. The reform momentum should be sustained to safeguard macroeconomic stability and enhance Sri Lanka’s resilience to shocks. This is particularly important given heightened downside risks to the economy from persistent trade policy uncertainty and geopolitical tensions, he added.
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