IMF willing to revise fiscal targets, says CB

• CB Governor Coomaraswamy says now it’s a matter of how much flexibility IMF can show
• Govt. wants fiscal space for physical infrastructure projects and social empowerment schemes
• Govt. currently working on new fiscal targets to present to IMF
• IMF team to visit Sri Lanka on Feb.14; requests year-end fiscal account details for 2018 

By Nishel Fernando 

The Central Bank Governor Dr.Indrajit Coomaraswamy said the International Monetary Fund (IMF) has agreed for flexibility to revise fiscal targets set for this year, following the discussions held in Washington, early this week. 

Delivering the keynote speech at the Economy and Sector Review and Outlook 2019 organised by the Ceylon Chamber of Commerce (CCC), Coomaraswamy said an IMF team will visit Sri Lanka on February 14 to resume discussions on the stalled US $1.5 billion Extended Fund Facility (EFF), of which US $1 billion has been already disbursed. 

“The IMF understood our situation and they are willing to be more flexible. Now it’s about how much flexibility they can show. The main area we are asking flexibility is in terms of fiscal targets. Primary account surplus target was to be 1.8 percent of GDP for this year; the government thinks it’s too high and we are trying to negotiate it down,” he said.

Coomaraswamy noted that the government wanted to create fiscal space for two types of growth-oriented fiscal programmes— physical infrastructure projects and social empowerment schemes. 

He said that the government is currently working on new fiscal targets to present to the IMF team and noted that the 4.8 percent deficit target set for this year might go up. 

The IMF has also requested for year-end fiscal account details for 2018 to be presented during their visit to Sri Lanka. 

Dr.Coomaraswamy said that both government revenue and expenditure (due to low capital expenditure at the latter part of the year) have come down below the targets during last year.

However, the Governor hinted that the government is unlikely to extend the IMF facility, noting that the government will have to agree to more conditions. 

“If you extend and get more resources, then you will have more conditions. So that’s what the government have to balance; the government has to decide if it can take more conditions.” 

Justifying the recent visit to Washington, Coomaraswamy said that the government wanted to get a positive signal from the IMF to go to capital markets to raise funds for debt repayments. 

“Because we couldn’t wait until the IMF staff level agreement in March, the minister went to Washington to basically get a positive signal from the IMF.”