IMF Staff Concludes Virtual Mission to Sri Lanka

IMF News, May 26, 2022

Source details

Press Release No. 22/171
Mission dates: May 9-24
End-of-Mission press release date: May 26, 2022
IMF team leaders: Mr. Peter Breuer and Mr. Masahiro Nozaki
Principal Sri Lankan interlocutors: Honorable Prime Minister Ranil Wickremesinghe (concluding meeting), Governor Nandalal Weerasinghe (Central Bank of Sri Lanka), Secretary to the Treasury Mahinda Siriwardana
Other engagements: representatives of the private sector, the financial sector, and development partners

Sri Lanka is facing difficult economic conditions and severe balance of payments problems.
Recent economic indicators suggest that economic activities have been negatively affected by fuel and power shortages.
Rising global food and oil prices have further added to the balance of payments pressures.
Inflation has accelerated, driven by shortages of goods, fuel price increases, and currency depreciation.
The IMF team expressed deep concern about the impact of the ongoing crisis on the people, particularly the poor and vulnerable groups.
IMF staff assessment: Sri Lanka’s public debt is assessed as unsustainable.

The IMF team held technical discussions on a comprehensive reform package to restore macroeconomic stability and debt sustainability.
Discussions focused on:
- Restoring fiscal sustainability while protecting the vulnerable and poor.
- Ensuring credibility of the monetary policy and exchange rate regimes.
- Preserving financial sector stability.
- Structural reforms to enhance growth and strengthen governance.
The team made good progress in assessing the economic situation and in identifying policy priorities to be taken going forward.
The team expects these discussions will help the authorities formulate their reform program.

The team welcomed the appointment of financial and legal advisors to engage in a collaborative dialogue with Sri Lanka’s creditors as an important step towards restoring public debt sustainability.
Because public debt is assessed as unsustainable, approval by the Executive Board of an IMF-supported program for Sri Lanka would require adequate assurances that debt sustainability will be restored.

IMF staff will continue to monitor the economic and political situation very closely.
IMF staff will engage with the authorities to formulate concrete measures under an IMF-supported program.
IMF staff will engage with broader stakeholders to support a timely resolution of the crisis.
The IMF reaffirmed its commitment to support Sri Lanka at this difficult time, in line with the IMF’s policies.
Staff expressed gratitude to the authorities for their constructive engagement and support during the mission.

IMF Staff Concludes Virtual Mission to Sri Lanka — Press Release No. 22/171 (May 26, 2022).