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Full economic recovery is not yet assured – IMF

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An International Monetary Fund (IMF) mission team led by Mr. Peter Breuer and Ms. Katsiaryna Svirydzenka visited Colombo from September 14 to 27, 2023 to discuss economic and financial policies to support the approval of the First Review of the program under the EFF arrangement.

At the end of the mission, Mr. Breuer and Ms. Svirydzenka issued the following statement:

“The people of Sri Lanka have shown remarkable resilience in the face of enormous challenges. Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP in the second quarter contracting by 3.1 percent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months.

“Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth. The authorities have met the program’s primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability. However, revenue mobilization gains–while improved relative to last year–are expected to fall short of initial projections by nearly 15 percent by year end, in part due to economic factors. The onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall. This could weaken the government’s ability to provide essential public services; and undermine the path to debt sustainability. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.

“Against continued uncertainty, it also remains important to rebuild external buffers by strong reserves accumulation. Building on the Central Bank of Sri Lanka’s success in controlling inflation, refraining from monetary financing will help keep inflation in check. Other challenges include maintaining cost recovery of electricity pricing.

“The government has made steady progress on structural reforms. Key legislations passed in Parliament, including the new Central Bank Act and the Anti-Corruption Act, could improve governance if implemented effectively. The IMF Governance Diagnostic report would inform future reform measures to strengthen governance when published. A new welfare benefit payment scheme was enacted with new eligibility criteria that aims to improve targeting, adequacy, and coverage of social safety nets. To ensure financial stability, steps were taken on conducting bank diagnostics, developing a roadmap for addressing banking system capital and liquidity shortfalls, and improving the bank resolution framework.

“The authorities have also made headway on regaining debt sustainability through the execution of the domestic debt restructuring and advancing discussions with external creditors. As Sri Lanka is restructuring its public debt which is in arrears, Executive Board approval of the first program review requires the completion of financing assurances reviews. These financing assurances reviews will focus on whether adequate progress has been made with debt restructuring to give confidence that it will be concluded in a timely manner and in line with the program’s debt targets.

“Discussions are on-going, and the authorities are continuing to make progress on their plans for revenue mobilization targets, anti-corruption efforts, and other important structural reforms.

“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Mr. Shehan Semasinghe, Chief of Staff to the President Mr. Sagala Ratnayaka, Secretary to the Treasury Mr. K M Mahinda Siriwardana, and other senior government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners.

“We would like to thank the authorities for the excellent collaboration during the mission. The team will continue its discussions in the context of the First Review with the goal of reaching a staff-level agreement in the near term. We reaffirm our commitment to support Sri Lanka at this difficult time.”

(imf.org)

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03 vehicles collide at railway crossing

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03 vehicles have collided at the Merawala railway crossing on the Chilaw-Colombo main road.

The accident occurred at around 6.25 a.m. this morning (May 21) when a van, which had stopped behind a fuel bowser at the Chilaw Marawala railway crossing while it was closed for train traffic, was rear-ended by a prime mover transporting cement.

The prime mover had been unable to stop due to brake failure.

The van involved in the accident sustained significant damage and Chilaw Police are currently conducting further investigations.



(Pic: Accident 1st)

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Ramith Rambukwella arrives before CIABOC

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Ramith Rambukwella – son of former Minister Keheliya Rambukwella arrived at the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) earlier today (May 21) to record a statement.

Colombo Chief Magistrate Thanuja Lakmali yesterday (May 20) ordered the further remand of Keheliya Rambukwella until June 03, following his arrest by the CIABOC over 03 complaints related to alleged corruption.

The court also granted permission to name Ramith Rambukwella as a suspect in the case.

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Mahindananda seeks permission for home cooked meals

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Former Minister Mahindananda Aluthgamage, who is currently in remand custody, has submitted a written request to prison authorities seeking permission to receive food from his home.

He is currently being held at the “M 2” ward of the Colombo Remand Prison along with around 10 other prisoners, according to reports.

It is also reported that former minister Keheliya Rambukwella is being detained in the same ward.

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