IMF Staff Concludes Visit to Sri Lanka

IMF News, June 30, 2022

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An International Monetary Fund (IMF) mission team led by Messrs. Peter Breuer and Masahiro Nozaki visited Colombo from June 20 to 30, 2022 to discuss IMF support for Sri Lanka and the authorities’ comprehensive economic reform program.
Ms. Anne-Marie Gulde-Wolf, Deputy Director of the IMF’s Asia and Pacific Department, participated in policy discussions.
End-of-Mission press release dated June 30, 2022.
The mission held meetings with President Gotabaya Rajapaksa, Prime Minister and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, Secretary to the Treasury K M Mahinda Siriwardana, other senior government and CBSL officials, Parliamentarians, representatives from the private sector, civil society organizations, and development partners.

“Sri Lanka is going through a severe economic crisis.”
The economy is expected to contract significantly in 2022, while inflation is high and rising.
The critically low level of foreign reserves has hampered the import of essential goods.
The team observed hardships faced by the Sri Lankan people, especially the poor and vulnerable, who are affected disproportionately by the crisis.
Public debt is assessed as unsustainable; Executive Board approval of an EFF arrangement would require adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored.

Restore macroeconomic stability and debt sustainability.
Protect the poor and vulnerable.
Safeguard financial stability.
Step up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.

Reduce the elevated fiscal deficit while ensuring adequate protection for the poor and vulnerable.
Implement far-reaching tax reforms, given the low level of revenues, to meet fiscal objectives.
Contain rising levels of inflation.
Address severe balance of payments pressures.
Reduce corruption vulnerabilities.
Embark on growth-enhancing structural reforms.

The authorities’ monetary, fiscal policy and other actions since early April were described as important first steps to address the crisis.
The staff team and the authorities made significant progress on defining a macroeconomic and structural policy package during the mission.
Discussions will continue virtually with a view to reaching a staff-level agreement on an IMF Extended Fund Facility (EFF) arrangement in the near term.
Because public debt is assessed as unsustainable, reaching an agreement would require adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored.

The IMF team thanked the authorities for their candid approach and warm hospitality and expressed commitment to continue supporting Sri Lanka and its people.

IMF Communications Department — Press Release No. 22/242 (June 30, 2022)