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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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Iranian President Ebrahim Raisi killed in helicopter crash, official says

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Iranian President Ebrahim Raisi and his foreign minister were killed in a helicopter crash in mountainous terrain and icy weather, an Iranian official said on Monday, after search teams located the wreckage in East Azerbaijan province.

“President Raisi, the foreign minister and all the passengers in the helicopter were killed in the crash,” the senior Iranian official told Reuters, asking not to be named because of the sensitivity of the matter.

Iran’s Mehr news agency confirmed the deaths, reporting that “all passengers of the helicopter carrying the Iranian president and foreign minister were martyred”.

An Iranian official earlier told Reuters the helicopter carrying Raisi and Foreign Minister Hossein Amirabdollahian was completely burned in the crash on Sunday.

State TV reported that images from the site showed the aircraft slammed into a mountain peak, although there was no official word on the cause of the crash.

State news agency IRNA said Raisi was flying in a U.S.-made Bell 212 helicopter.

Raisi, 63, was elected president in 2021, and since taking office has ordered a tightening of morality laws, overseen a bloody crackdown on anti-government protests and pushed hard in nuclear talks with world powers.

Iranian Supreme Leader Ayatollah Ali Khamenei, who holds ultimate power with a final say on foreign policy and Iran’s nuclear programme, had earlier sought to reassure Iranians, saying there would be no disruption to state affairs.

Rescue teams fought blizzards and difficult terrain through the night to reach the wreckage in the early hours of Monday.

“With the discovery of the crash site, no signs of life have been detected among the helicopter’s passengers,” the head of Iran’s Red Crescent, Pirhossein Kolivand, told state TV.

Earlier, the national broadcaster had stopped all regular programming to show prayers being held for Raisi across the country.

In the early hours of Monday, it showed a rescue team, wearing bright jackets and head torches, huddled around a GPS device as they searched a pitch-black mountainside on foot in a blizzard.
Several countries expressed concern and offered assistance in any rescue.

The White House said U.S. President Joe Biden had been briefed on reports about the crash. China said it was deeply concerned. The European Union offered emergency satellite mapping technology.

The crash comes at a time of growing dissent within Iran over an array of political, social and economic crises. Iran’s clerical rulers face international pressure over Tehran’s disputed nuclear programme and its deepening military ties with Russia during the war in Ukraine.

Since Iran’s ally Hamas attacked Israel on Oct. 7, provoking Israel’s assault on Gaza, conflagrations involving Iran-aligned groups have erupted throughout the Middle East.

In Iran’s dual political system, split between the clerical establishment and the government, it is Raisi’s 85-year-old mentor Khamenei, supreme leader since 1989, who holds decision-making power on all major policies.
For years many have seen Raisi as a strong contender to succeed Khamenei, who has endorsed Raisi’s main policies.

Raisi’s victory in a closely managed election in 2021 brought all branches of power under the control of hardliners, after eight years when the presidency had been held by pragmatist Hassan Rouhani and a nuclear deal negotiated with powers including Washington.

However, Raisi’s standing may have been dented by widespread protests against clerical rule and a failure to turn around Iran’s economy, hamstrung by Western sanctions.

Raisi had been at the Azerbaijani border on Sunday to inaugurate the Qiz-Qalasi Dam, a joint project. Azerbaijan’s President Ilham Aliyev, who said he had bid a “friendly farewell” to Raisi earlier in the day, offered assistance in the rescue.

Coming soon: Get the latest news and expert analysis about the state of the global economy with Reuters Econ World. Sign up here.

(Reuters)

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Fire breaks out in workers’ living quarters near Colombo Port

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A fire has reportedly broken out in the living quarters of highway access road workers near the Colombo Port.

The Colombo Fire Brigade said it has dispatched four fire trucks to assist in extinguishing the flames.

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President Wickremesinghe meets Elon Musk to discuss starlink implementation in Sri Lanka

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President Ranil Wickremesinghe has met with billionaire and investor Elon Musk on the sidelines of the 10th World Water Forum High-Level Meeting being held in Indonesia.

During the meeting, Wickremesinghe and Musk discussed the implementation of ‘Starlink’ in Sri Lanka.

It was emphasized that Sri Lanka is committed to expediting the application process to connect the country to the global Starlink network, according to the President’s Media Division (PMD).

Minister Jeevan Thondaman, accompanying the President on his two-day visit to Indonesia, tweeted: “President and Elon discussed Sri Lanka’s recovery, economic potential, and new opportunities for investment. Great to have two visionary leaders come together for Sri Lanka.”

Elon Musk arrived in Indonesia’s resort island of Bali on Sunday to launch Starlink satellite internet service in the world’s largest archipelago nation.

The billionaire head of Tesla and SpaceX, and owner of social platform X, arrived by private jet on the idyllic “island of the gods,” renowned for its tropical beaches, terraced rice paddies, mystical temples, and colorful spiritual offerings.

Musk is slated to launch the service alongside Indonesian President Joko Widodo in a ceremony later Sunday at a public health clinic in Denpasar, the provincial capital of Bali. 

Musk will also sign an agreement to enhance connectivity in the country’s health and education sectors.

During his first in-person visit to Bali, Musk is also scheduled to participate in the 10th World Water Forum, which seeks to address global water and sanitation challenges.

–With agencies inputs

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