{
  "title": "Press Release: IMF Executive Board Approves Three-Year US$1.5 Billion Extended Arrangement under EFF for Sri Lanka",
  "publication": "IMF News, June 3, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr16262",
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  "overlayPath": "/en/news/articles/2015/09/14/01/49/pr16262/index.md",
  "summary": "Executive Board approved a 36-month extended arrangement under the Extended Fund Facility (EFF) equivalent to SDR 1.1 billion (about US$1.5 billion, or 185 percent of quota).",
  "publishDate": "2016-06-03",
  "sections": [
    {
      "heading": "Approval and financing",
      "content": "- Executive Board approved a 36-month extended arrangement under the Extended Fund Facility (EFF) equivalent to SDR 1.1 billion (about US$1.5 billion, or 185 percent of quota).\n- Arrangement expected to catalyze an additional US$650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion (over and above existing financing arrangements).\n- Immediate disbursement: SDR 119.894 million (about US$ 168.1 million).\n- Remainder available in 6 installments subject to quarterly reviews."
    },
    {
      "heading": "Purpose and strategic focus of the program",
      "content": "- Aim: meet balance of payments needs from a deteriorating external environment and pressures pending macroeconomic policy adjustment; provide a policy anchor for macroeconomic stability and structural reforms.\n- Key objectives:\n  - Implement a structural increase in revenues to facilitate reduction in the fiscal deficit.\n  - Reverse the decline in central bank foreign exchange reserves.\n  - Reduce public debt relative to GDP and lower Sri Lanka’s risk of debt distress.\n  - Enhance public financial management and improve operations of state owned enterprises.\n  - Transition toward inflation targeting with a flexible exchange rate regime.\n  - Promote sustainable and inclusive economic growth.\n- Program organized under six reform pillars:\n  (i) Fiscal consolidation;\n  (ii) Revenue mobilization;\n  (iii) Public financial management reform;\n  (iv) State enterprise reform;\n  (v) Transition to flexible inflation targeting under a flexible exchange rate regime; and\n  (vi) Reforms in the trade and investment regime."
    },
    {
      "heading": "Policy priorities and recommendations (from Deputy Managing Director statement)",
      "content": "- Return to fiscal consolidation targeting a reduction in the overall fiscal deficit to 3.5 percent of GDP by 2020.\n- Rebuild tax revenues through comprehensive reform of tax policy and administration.\n- Strengthen expenditure control and move state enterprise operations toward more commercial footing.\n- Commit to exchange rate flexibility to adjust to a shifting external environment, enable rebuilding of foreign exchange reserves, and allow the central bank to focus on price stability.\n- Promote greater role for market forces, outward orientation, and comprehensive trade reform to boost competitiveness and attract investment."
    },
    {
      "heading": "Recent economic developments (2015 and context)",
      "content": "- Real GDP growth: 4.8 percent in 2015 (broadly unchanged from 2014).\n- Growth drivers: strong services (particularly tourism), continued agriculture growth, positive but declining contribution from manufacturing.\n- Sectors slowing: negative growth in construction and weaker growth in manufacturing indicative of slowdown in public and private investment.\n- Economy estimated to be operating slightly below potential.\n- Unemployment rate: 4.3 percent in end 2015.\n- Government fiscal deficit: expanded to 6.9 percent of GDP in 2015.\n  - Revenue increased by 1.5 percentage points to 13.1 percent of GDP (mostly one-off measures and temporary vehicle import surge).\n  - Expenditures rose by 2.1 percentage points to 19.9 percent of GDP (post-election wage hike, higher interest bill, additional spending on goods and services, increased income transfers).\n- Current account deficit: contained at 2.5 percent of GDP in 2015 (same level as 2014).\n- Balance of payments deterioration driven by:\n  - Foreign exit from government securities.\n  - Lower FDI inflows.\n  - Slow implementation of externally financed public and private projects.\n  - Worsened investor sentiment amid global market volatility and concern over domestic policies.\n- External pressures magnified by domestic imbalances and higher volatility around the January and August 2015 elections and the November 2015 official budget.\n- Rupee under downward pressure largely due to capital flow developments.\n- Foreign exchange and government bond markets were volatile in March 2016, highlighting rigidities."
    },
    {
      "heading": "Key projections and selected indicators (2014–20 from annex)",
      "content": "- GDP and inflation (in percent)\n  - Real GDP growth: 2014: 4.9; 2015: 4.8; 2016: 5.0; 2017: 5.2; 2018: 5.4.\n  - Inflation (average): 2014: 3.3; 2015: 0.9; 2016: 4.1; 2017: 5.3; 2018: 5.1.\n  - Inflation (end-of-period): 2014: 2.1; 2015: 2.8.\n  - Core inflation (end-of-period): 2014: 3.2; 2015: 4.5; 2016: 4.3.\n- Savings and investment (in percent of GDP)\n  - National savings: 2014: 24.5; 2015: 25.9; 2016: 26.9; 2017: 26.0; 2018: 26.2; 2019: 25.7.\n  - Government (savings): 2014: -1.1; 2015: -2.1; 2016: -0.9; 2017: 0.2; 2018: 1.4; 2019: 1.7; 2020: 2.2.\n  - Private (savings): 2014: 25.6; 2015: 28.0; 2016: 27.8; 2017: 24.8; 2018: 24.2; 2019: 23.6.\n  - National Investment: 2014: 27.0; 2015: 28.4; 2016: 28.3; 2017: 28.8; 2018: 29.3; 2019: 29.2.\n  - Savings-Investment balance: 2014: -2.5; 2015: -1.5; 2016: -2.8; 2017: -3.1; 2018: -3.3; 2019: -3.4.\n- Public finances (in percent of GDP)\n  - Revenue and grants: 2014: 11.5; 2015: 13.1; 2016: 13.0; 2017: 14.0; 2018: 15.3; 2019: 15.5; 2020: 15.8.\n  - Expenditure: 2014: 17.8; 2015: 19.9; 2016: 18.4; 2017: 18.8; 2018: 19.3; 2019: 19.2.\n  - Primary balance: 2014: -2.2; 2015: -0.8; 2016: 0.0; 2017: 0.7; 2018: 0.8; 2019: 1.0.\n  - Central government balance: 2014: -6.2; 2015: -6.9; 2016: -5.4; 2017: -4.7; 2018: -4.0; 2019: -3.7; 2020: -3.5.\n  - Central government net domestic financing: 2014: 3.8; 2015: 2.3; 2016: 1.3.\n  - Central government debt: 2014: 70.7; 2015: 76.0; 2016: 77.2; 2017: 75.5; 2018: 73.1; 2019: 68.2.\n- Money and credit (percent change, end of period)\n  - Reserve money: 2014: 18.3; 2015: 16.5; 2016: 12.0; 2017: 13.5; 2018: 15.0; 2019: 15.6.\n  - Broad money: 2014: 13.4; 2015: 10.8; 2016: 15.4; 2017: 15.1; 2018: 15.2.\n  - Domestic credit: 2014: 10.5; 2015: 23.5; 2016: 8.5; 2017: 11.7; 2018: 11.8; 2019: 12.5.\n  - Credit to private sector: 2014: 8.8; 2015: 25.1; 2016: 10.0; 2017: 14.3; 2018: 14.5.\n  - Credit to government: 2014: 12.9; 2015: 21.3; 2016: 7.7; 2017: 7.2.\n- Balance of payments (in millions of U.S. dollars)\n  - Exports: 2014: 11,130; 2015: 10,505; 2016: 10,456; 2017: 10,942; 2018: 11,838; 2019: 12,664; 2020: 14,093.\n  - Imports: 2014: -19,417; 2015: -18,935; 2016: -18,392; 2017: -20,763; 2018: -22,606; 2019: -24,357; 2020: -26,608.\n  - Current account balance: 2014: -1,989; 2015: -2,009; 2016: -1,202; 2017: -2,419; 2018: -2,916; 2019: -3,343; 2020: -3,812.\n  - Current account balance (in percent of GDP): 2014: -2.5; 2015: -2.5; 2016: -1.5; 2017: -2.8; 2018: -3.1; 2019: -3.3; 2020: -3.4.\n  - Export value growth (percent): 2014: 7.1; 2015: -0.5; 2016: 4.6; 2017: 8.2; 2018: 7.0; 2019: 11.3.\n  - Import value growth (percent): 2014: 7.9; 2015: -2.9; 2016: 8.9; 2017: 9.2.\n- Gross official reserves (end of period)\n  - In millions of U.S. dollars: 2014: 8,208; 2015: 7,304; 2016: 7,853; 2017: 9,372; 2018: 11,866; 2019: 13,033; 2020: 13,843.\n  - In months of imports: 2014: 3.7.\n- External debt (public and private)\n  - In billions of U.S. dollars: 2014: 43.0; 2015: 44.8; 2016: 45.9; 2017: 49.0; 2018: 53.4; 2019: 58.4; 2020: 62.4.\n  - As a percent of GDP: 2014: 53.8; 2015: 55.1; 2016: 55.8; 2017: 55.9; 2018: 56.3; 2019: 57.1; 2020: 56.5.\n- Memorandum item: Nominal GDP (in billions of rupees): 2014: 10,448; 2015: 11,183; 2016: 12,147; 2017: 13,374; 2018: 14,787; 2019: 16,333; 2020: 18,076.\n\nPress Release No. 16/262; June 3, 2016; IMF Communications Department.\n\n---\n\n\n References\n\n- Sri Lanka and the IMF\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/country/LKA/index.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr16262"
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    "Published: June 3, 2016",
    "Executive Board approved a 36-month extended arrangement under the Extended Fund Facility (EFF) equivalent to SDR 1.1 billion (about US$1.5 billion, or 185 percent of quota).",
    "Arrangement expected to catalyze an additional US$650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion (over and above existing financing arrangements).",
    "Immediate disbursement: SDR 119.894 million (about US$ 168.1 million).",
    "Remainder available in 6 installments subject to quarterly reviews.",
    "Aim: meet balance of payments needs from a deteriorating external environment and pressures pending macroeconomic policy adjustment; provide a policy anchor for macroeconomic stability and structural reforms.",
    "Key objectives:",
    "Program organized under six reform pillars:",
    "Return to fiscal consolidation targeting a reduction in the overall fiscal deficit to 3.5 percent of GDP by 2020.",
    "Rebuild tax revenues through comprehensive reform of tax policy and administration.",
    "Strengthen expenditure control and move state enterprise operations toward more commercial footing.",
    "Commit to exchange rate flexibility to adjust to a shifting external environment, enable rebuilding of foreign exchange reserves, and allow the central bank to focus on price stability.",
    "Promote greater role for market forces, outward orientation, and comprehensive trade reform to boost competitiveness and attract investment.",
    "Real GDP growth: 4.8 percent in 2015 (broadly unchanged from 2014).",
    "Growth drivers: strong services (particularly tourism), continued agriculture growth, positive but declining contribution from manufacturing.",
    "Sectors slowing: negative growth in construction and weaker growth in manufacturing indicative of slowdown in public and private investment.",
    "Economy estimated to be operating slightly below potential.",
    "Unemployment rate: 4.3 percent in end 2015.",
    "Government fiscal deficit: expanded to 6.9 percent of GDP in 2015.",
    "Current account deficit: contained at 2.5 percent of GDP in 2015 (same level as 2014).",
    "Balance of payments deterioration driven by:",
    "External pressures magnified by domestic imbalances and higher volatility around the January and August 2015 elections and the November 2015 official budget.",
    "Rupee under downward pressure largely due to capital flow developments.",
    "Foreign exchange and government bond markets were volatile in March 2016, highlighting rigidities.",
    "GDP and inflation (in percent)",
    "Savings and investment (in percent of GDP)",
    "Public finances (in percent of GDP)",
    "Money and credit (percent change, end of period)",
    "Balance of payments (in millions of U.S. dollars)",
    "Gross official reserves (end of period)",
    "External debt (public and private)",
    "Memorandum item: Nominal GDP (in billions of rupees): 2014: 10,448; 2015: 11,183; 2016: 12,147; 2017: 13,374; 2018: 14,787; 2019: 16,333; 2020: 18,076.",
    "[Sri Lanka and the IMF](http://www.imf.org/external/country/LKA/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/country/LKA/index.htm](https://www.imf.org/external/country/LKA/index.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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