No way for Govt. to break guardrails of IMF programme

• IMF keen to see next budget in line with programme objectives
• Upon completion of the Executive Board review, Sri Lanka will have access to about US $ 330 million dollars

By Kelum Bandara  

The government has committed to stay within the main guardrails of the IMF (International Monetary Fund) programme and flexibility on its priorities and objectives are only within them, a top official said.  

Making remarks to the press at the conclusion of the latest IMF mission between November 17 and 23, Chief of Mission for Sri Lanka Peter Breuer said the budget process is taking place later this year and the IMF is keen that it is line with the programme objectives. He cited the primary surplus, the revenue and the quality of fiscal measures as the important guardrails.   

“Within those guardrails, we have agreed on a package that allows them to achieve their priorities and objectives. That will eventually be documented in the budget that is submitted to Parliament. It will then be possible to go ahead with this,” he said.  

He said, “We had productive discussions with the authorities and a broad spectrum of stakeholders, including parliamentarians, representatives from the private sector, civil society organizations, and developers. We have reached staff level agreement with the Sri Lankan authorities on the third review under the four-year Extended Fund Facility programme,” he said. Upon completion of the Executive Board review, Sri Lanka will have access to about US $ 330 million dollars. This will bring IMF financial support to disperse under the arrangement to a total of about $1.3 billion.  

In terms of the macroeconomic situation, Sri Lanka’s ambitious reform agenda supported by the EFF is delivering commendable outcomes. The economy expanded on average by 4 percent year-on-year, and high-frequency indicators point to continued expansion across all sectors, according to him.   

He said maintaining macroeconomic stability and restoring debt sustainability is key to securing Sri Lanka’s prosperity and require persevering with responsible fiscal policy.  

 He asserted that the cost recovery energy pricing is an important pillar of the IMF supported programme to reduce the fiscal risks from state-owned enterprises to make sure that they’re no longer a burden on the public finances and taxpayer.   

Responding to a query about the announcement by the previous government to lift the ban on vehicle imports, he said it was discussed and would be a very important source of revenue for the government in the year ahead.  

“Of course, it needs to be managed carefully with respect to the reserves of the country,” he said.