Sri Lanka in “pretty good shape” to face first IMF review: Dr.Coomaraswamy

• Says SL has exceeded expectations on the monetary side and successfully met quantitative targets
• Anticipates a smooth first review but emphasises the importance of continued progress in debt restructuring
• Expresses confidence in debt restructuring reaching completion by November
• Emphasises need for SL to stick to its reform agenda to prevent social and economic instability

• By Shabiya Ali Ahlam

Former Central Bank Governor and senior economist Dr. Indrajith Coomaraswamy sounded upbeat on the prospects of Sri Lanka satisfying the International Monetary Fund (IMF) in the upcoming review this month as it has exceeded expectations in certain aspects.

“On the first review I think we seem to be in pretty good shape. The visiting IMF team will reasonably be satisfied with a number of aspects of the programme.

Sri Lanka has outperformed and has over achieved on the monetary side. The quantitative targets have been met,” said Dr. Coomaraswamy.
He shared these views addressing a virtual forum organised by NBD Securities themed ‘Turning the Page in Sri Lanka: Beyond the Sovereign Debt Crisis,’ alongside sovereign debt restructuring expert Lee. C. Buchheit.

In August, Sri Lanka witnessed a notable reversal in inflation, with the rate dropping to 4 percent. This marks a significant improvement compared to the staggering 70 percent inflation recorded in September of the previous year.
Similarly, on the external side, Dr. Coomaraswamy noted that the country has seen “very good performance” as the expected targets have been more or less met.

The fiscal and revenue aspects however have experienced some slippage, requiring enhanced efforts to achieve the set targets under the IMF programme. He emphasised that the government has initiated corrective actions by making adjustments to duties and strengthening tax administration.

“So in terms of the first review, I don’t see any problems about getting through it. But of course, progress has to be made on debt restructuring as well. 

As long as Sri Lanka has demonstrated that it has been co-operating, and I don’t think anybody can challenge the fact that Sri Lanka has cooperated and progress has been made, there shouldn’t be any issue,” he reiterated.

Dr. Coomaraswamy also expressed confidence in Sri Lanka’s ability to complete the debt restructuring by November, which he said will augur well for the country going forward.

Meanwhile, the Central Bank chief asserted that Sri Lanka cannot afford to deviate from its reform agenda, as doing so could result in social and economic instability once again.

“I hope the officials realise that they have to do their job and resist when politicians do the wrong things. And the public needs to speak up when they see obviously wrong things.

I’m hopeful the politicians have learnt enough from what the country was a year or 18 months ago, not to repeat the same mistakes. If they do, the situation will be much more severe than last year,” he cautioned.