Govt. in the process of implementing reforms: IMF
Manuela Goretti
By Hiran H.Senewiratne-June 21, 2018, 10:10 pm
The International Monetary Fund (IMF) said Sri Lanka's economy is now on the right track because the government is in the process of implementing certain reforms that have been recommended, IMF Mission Chief Manuela Goretti said.
"Subject to Cabinet approval of an automatic fuel pricing mechanism—consistent with the EFF-supported program, the Board is expected to consider Sri Lanka’s request for completion of the fourth review in June 2018, Goretti said."Sri Lanka has met all end-December performance targets involving deficits, forex reserve collection, though inflation went up, and has since fallen, the IMF said. 'Sri Lanka had the emerging Asia's highest inflation in 2017 after Mongolia, even without fuel prices being raised with the rupee steadily falling under a real effective exchange rate targeting policy, Goretti told the local media at World Bank office in Colombo on Wednesday via video conferencing, while being based in Washington,
She also said that though Sri Lanka is now in the process of implementing certain reforms it is still behind on some structural benchmarks.'The authorities are taking action to implement all the pending structural benchmarks for this review, despite some delays, she said.
"The Central Bank of Sri Lanka (CBSL) has effectively curbed credit growth and stabilized inflation, despite recent pressures. However, the economy remains vulnerable to adverse domestic and external shocks, given the still sizeable public debt, large refinancing needs, and low external buffers, she said.
The International Monetary Fund on Wednesday released the staff report pertaining to the annual consultation (2018 Article IV) and the fourth review of its economy and economic policies under the three-year US$ 1.5 billion Extended Fund Facility (EFF)) awarded in 2016.
The performance in the first half of the EFF program has remained broadly on track Goretti said..
'Despite some implementation delays and weather-related shocks, the authorities achieved a primary surplus in 2017, through expenditure management and revenue mobilization.'
The report further said that the authorities have achieved major milestones in their reform agenda including the launch of the new Inland Revenue Act, important progress with State-Owned Enterprises (SOE) and energy-pricing reforms, as well as adoption of the Central Bank's Roadmap to flexible inflation targeting. The IMF advised the government to push ahead with its "Vision 2025" objectives by advancing fiscal consolidation through reforms and better governance of SOEs.
"Keeping the reform momentum is key to increase Sri Lanka's resilience to external shocks and lay the foundation for more sustainable and robust growth," the lender said.
The IMF Executive Directors welcoming the authorities' efforts to improve the policy mix through continued fiscal consolidation, prudent monetary policy, and landmark structural reforms, commended the progress made by Sri Lanka under the Fund-supported program.
Directors welcomed the authorities' commitment to the program and agreed that sustained reform momentum is critical to safeguard the economic gains to date, strengthen resilience, and support inclusive growth.
Directors saw the recent approval of an automatic fuel pricing formula as a major achievement towards reducing the still elevated fiscal risks posed by state-owned enterprises (SOEs) and welcomed the launch of the new Inland Revenue Act (IRA) to support the authorities' fiscal consolidation efforts.
They recommended gradual liberalization of the trade regime and further improvements to the investment climate, including through robust implementation of the new IRA.
