ECONOMYNEXT – Any review in Sri Lanka’s International Monetary Fund (IMF) programme could be under the guard rails of the bailout deal, the global lender’s Senior Mission Chief Peter Breuer said at the end of a view mission, amid expectations over renegotiation of the agreement under new government.
President Anura Kumara Dissanayake’s National People’s Power (NPP) wanted to renegotiate some aspects of the IMF deal signed under the previous government.
The adjustments to the programme include both direct and indirect tax reductions and more concessions to the public, NPP members have said in public.
On Saturday, the IMF said it had reached staff-level agreement with Sri Lankan authorities on economic policies to conclude the third review of Sri Lanka’s economic reform program supported by the IMF’s Extended Fund Facility (EFF).
“The challenges for Sri Lanka are the same,” Breuer told reporters on Saturday (23) at a media briefing when asked if the IMF would consider a review of the programme, given the past government which was pushing for the IMF conditions is now defeated.
“Sri Lanka has to think about how to address these, how to ensure full recovery on the prices and able to ensure inclusive growth. So the main guard rails of the programme are designed in such a way to facilitate that.”
“Within those guard rails, review is an opportunity to take stock of developments and look at any adjustment to the programme necessary.”
He said the IMF has done it in all past reviews.
Sri Lanka will have access to about 333 million dollars in financing, once the review is approved the IMF Executive Board.
Delivering his policy statement November 21 Presidnet Dissanayake said securing the staff-level agreement for the third review of the program will provide “a credible foundation for rebuilding our economy”.
“However, as a policy, we do not believe that this framework alone will suffice to address all the
deep-seated crises facing our economy,” he told while addressing the first session of the newly elected parliament in which his NPP has more than two-thirds.
“Nevertheless, it will be adequate for managing the crisis in our financial sector. Yet, the economic structure of our nation is severely compromised, akin to a system suffering from significant structural collapse.”
“Therefore, to navigate out of this collapse, we must adopt a new economic strategy.”
Dissanayake also said when the NPP government assumed office, the discussions on debt restructuring were in their final stages.
“At this juncture, debating whether the proposed restructuring plan is good or bad, advantageous or disadvantageous, serves no purpose. This is the reality we are faced with,” he said.
“Based on this, we have reached a common understanding regarding bilateral debt. We are now prepared to quickly formalize agreements with individual countries accordingly.”
“On the other hand, with regard to international sovereign bonds and commercial market debt, we have reached a preliminary agreement. We anticipate that this process will be completed by the end of December.
“Consequently, we believe that the debt restructuring program with the International Monetary Fund can be successfully concluded before the end of this year.”
Passing the review is also contingent on “the completion of financing assurances review, which will focus on confirming multilateral partners’ committed financing contributions and whether adequate progress has been made with the debt restructuring to give confidence that the restructuring will be concluded in a timely manner and in line with the program’s debt targets,” the IMF said. (Colombo/November 25/2024)
