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IMF completes 1st review of EFF, enabling disbursement of US$337 mn.

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The Executive Board of the International Monetary Fund (IMF) has completed the first review of the 48-month Extended Fund Facility (EFF) arrangement for Sri Lanka.

The completion of the first review allows for an immediate disbursement of around US$337 million, bringing the total IMF financial support disbursed so far to about US$670 million.

Following the Executive Board discussion on Sri Lanka, Mr. Kenji Okamura, Deputy Managing Director has issued the following statement :

“Macroeconomic policy reforms are starting to bear fruit and the economy is showing tentative signs of stabilization, with rapid disinflation, significant revenue-based fiscal adjustment, and reserves build-up.

“Performance under the EFF-supported program has been satisfactory. All quantitative performance criteria for end-June were met, except the one on expenditure arrears. All indicative targets were met, except the one on tax revenues. Most structural benchmarks were either met or implemented with delay by end-October 2023. The publication of a Governance Diagnostic Report, the first in Asia and a structural benchmark under the program, is a commendable first step towards addressing deep-rooted corruption weaknesses. Continued commitment to improving governance and timely implementation of the report’s recommendations can deliver tangible economic gains to all citizens.

“Sri Lanka’s agreements-in-principle with the Official Creditors Committee and Export-Import Bank of China on debt treatments are consistent with the EFF targets. They are an important milestone putting Sri Lanka’s debt on the path towards sustainability. A swift completion and signature of the Memoranda of Understanding with the official creditors is important. Timely implementation of the agreements, together with reaching a resolution with external private creditors on comparable terms, should help restore Sri Lanka’s debt sustainability over the medium term.

“To ensure a full and swift recovery, sustaining the reform momentum and strong ownership of reforms is of paramount importance. Key priorities include advancing revenue mobilization, aligning energy pricing with costs, strengthening social safety nets, rebuilding external buffers, safeguarding financial stability, eradicating corruption, and enhancing governance.

“Reinforcing the revenue-based fiscal consolidation supported by revenue administration reforms is critical to recover from program slippages and promote a break from past policy shortcomings.

“The Central Bank of Sri Lanka should continue to focus on the multi-pronged disinflation strategy to safeguard the credibility of its inflation targeting regime. Accumulating reserves, supported by exchange rate flexibility, remains an important priority under the EFF.

“Implementing the bank recapitalization plan and strengthening financial supervision and crisis management framework are crucial to safeguard financial sector stability.

“Further strengthening the social safety net and protecting social spending remains critical to safeguarding the poor and vulnerable.’’

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Lanka to take up bottom trawling

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When Indian Foreign Affairs Minister S. Jaishankar visits Colombo next week, the government is to take up the issue of Indian fishermen entering Sri Lanka’s northern territorial waters three days a week and engaging in illegal bottom trawling, Fisheries Minister Douglas Devananda said.

The Indian fishermen are expected to be back in Sri Lankan waters after a two-month-long annual breeding ban was lifted on Friday.

When President Ranil Wickremesinghe visited New Delhi last Sunday to attend the swearing-in ceremony of Indian Prime Minister Narendra Modi, the matter was raised at a meeting with Minister Dr. Jaishnakar.

“As a nation, we have to protect our resources, interests, and the livelihood of our fisherfolks. I hope to raise the issue in the next Cabinet meeting (June 19) as well,” Minister Devananda said.

Days before the Indian authorities lifted the annual breeding ban, a group of fishermen’s unions based in the North handed over a petition on Tuesday to officials at the Indian consulate office in Jaffna requesting India to take immediate steps to prevent Indian fishermen from coming into Sri Lankan waters at the expense of their livelihood.

The fishermen’s unions, which formed a collective called the Northern Fishermen’s Alliance, requested President Wickremesinghe

in a petition to urge Indian authorities to “expedite their maximum efforts to monitoring and preventing the daily incursion of thousands of Tamil Nadu trawlers every Monday, Wednesday, and Saturday evenings.”

The two-month-long ban, which came into effect on April 14 and was lifted on Friday, is enforced to facilitate the breeding of fish banks in the ocean and maintain the equilibrium of marine sources for sustainability.

Currently, Indian fishermen who engage in fishing in Sri Lankan territorial waters are arrested by the Navy and Coast Guard and subjected to legal action after their trawlers are seized.

Following the legal action in which the magistrate courts hand in a suspended sentence of eighteen months for engaging in fishing without a licence, fishermen are released and repatriated with the assistance of Indian diplomatic missions.

(sundaytimes.lk)

(This story, originally published by sundaytimes.lk has not been edited by SLM staff)

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Sri Lankan Youth to Be Freed from Cyber Camps in Myanmar

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State Minister of Foreign Affairs Tharaka Balasooriya said on his visit to Myanmar, he came to know that more than 100,000 youth from different countries are forcibly housed in the cyber camps in Myanmar, and 53,000 of them are Chinese nationals.

He was speaking to reporters at the Bandaranaike International Airport yesterday after completing an official visit to Myanmar and Thailand.

State Minister Balasooriya said, “We are confident that the 49 Sri Lankans who are forcibly held in cyber camps in Myanmar will be freed in the near future.” In addition to his visit to Myanmar, the State Minister also visited Thailand and discussed bilateral issues with the Deputy Prime Minister, Minister of Foreign Affairs, Minister of Justice and Home Affairs, as well as several Non-Governmental Organisations. They also discussed the forcible holding of youth from different countries in the cyber camps in Myanmar. They agreed that regional Governments should work together to secure their release.

(sundayobserver.lk)

(Except for the headline, this story, originally published by sundayobserver.lk has not been edited by SLM staff)

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IMF proposes new imputed rental income tax for Sri Lanka

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The International Monetary Fund (IMF) has proposed the introduction of an imputed rental income tax on owner-occupied and vacant residential properties in Sri Lanka, to be implemented by April 1, 2025. 

This recommendation comes as part of the IMF’s latest report on Sri Lanka, highlighting the need for sustained revenue mobilization efforts amid institutional challenges that hindered the initially planned property tax for 2025.

The IMF report emphasizes the importance of establishing a comprehensive property valuation database by August 2024, which will include assessed values, the latest assessment dates, and property types for all municipal councils. 

This database is a crucial step towards the effective implementation of the new tax.

Additionally, the report calls for the full operationalization of a nationwide digital Sales Price and Rents Register (SPRR) by the end of March 2025. 

This register will be accessible by the Inland Revenue Department (IRD), the valuation department, the land registry, and the public, serving as a key resource for assessing property values and the imputed rental income tax.

The IMF recognizes ongoing vulnerabilities and uncertainties in Sri Lanka, particularly concerning debt restructuring and the upcoming elections. 

The IMF directors have urged Sri Lankan authorities to continue strengthening macroeconomic policies to restore economic stability and debt sustainability while maintaining the momentum of reforms to promote long-term inclusive growth.

In support of Sri Lanka’s economic policies and reforms, the IMF Executive Board has completed the 2024 Article IV Consultation and Second Review under the 48-month Extended Fund Facility. 

This completion provides Sri Lanka with immediate access to SDR 254 million (approximately USD 336 million).

Moreover, the IMF has highlighted the importance of enacting the Asset Recovery Bill, following necessary public consultations, by November 2024. This bill is expected to play a significant role in enhancing fiscal responsibility and transparency within the country.

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