## IMF Executive Board Concludes 2018 Article IV Consultation and Completes Fourth Review under the Extended Arrangement Under the Extended Fund Facility with Sri Lanka, Approving US$ 252 Million Disbursement

_IMF News, June 1, 2018_

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## Bibliographic details
- Published: June 1, 2018

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### Review outcome and disbursements
- Executive Board completed the fourth review of Sri Lanka’s economic performance under the three-year Extended Arrangement under the Extended Fund Facility (EFF) on June 1, 2018.
- Completion of the review enables the disbursement of the equivalent of SDR 177.774 million (about US$ 252 million).
- Total disbursements under the arrangement to date amount to the equivalent of SDR 715.23 million (about US$ 1,014 million).
- Sri Lanka’s three-year extended arrangement was approved on June 3, 2016, in the amount of about SDR 1.1 billion (about US$1.5 billion, or 185 percent of quota).

### Major achievements cited
- Launch of the new Inland Revenue Act.
- Important steps in energy-pricing reforms.
- Progress towards flexible inflation targeting.
- Approval of an automatic fuel pricing formula described as a major achievement toward reducing fiscal risks from state-owned enterprises (SOEs).

### IMF assessment (Mr. Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director)
- “Sri Lanka has made important progress under its Fund-supported program. The authorities’ efforts to improve the policy mix through fiscal consolidation, prudent monetary policy, and landmark structural reforms are supporting the economic recovery, despite recent shocks.”
- Continued reform momentum is critical given:
  - “the still sizable public debt and low external buffers,” and
  - the need “to set the foundation for strong and inclusive growth.”

### Policy priorities and recommendations
- Fiscal policy
  - Further progress with revenue-based fiscal consolidation, supported by the new Inland Revenue Act, is needed to help safeguard important social and infrastructure spending, including in response to natural disasters.
  - Adopt a robust fiscal rule and medium-term debt management strategy to help place debt firmly on a downward path.
- State-owned enterprises (SOEs)
  - Implement the recently approved automatic fuel pricing formula.
  - Implement an automatic pricing formula for electricity.
  - Carry out a restructuring plan for Sri Lankan Airlines.
  - Further strengthen SOE governance and transparency.
  - Mitigate impacts on the vulnerable by strengthening social safety nets.
- Monetary policy and external resilience
  - The Central Bank of Sri Lanka should continue to manage monetary policy prudently in the face of price shocks and market volatility.
  - Sustain efforts to build up international reserves, with exchange rate flexibility as the first line of defense in response to volatile global capital flows.
  - Upgrade the central bank law to be instrumental for the new inflation targeting framework.
  - Monitor closely continued credit growth in the real estate sector despite stable financial soundness indicators.
- Structural reforms and inclusiveness
  - Step up implementation of structural reforms with a focus on:
    - Fostering gradual trade liberalization and the investment climate.
    - Developing a natural disaster risk financing framework.
    - Promoting gender equality in the labor market together with well-targeted social safety nets.

### Procedural note
- The Executive Board also concluded the 2018 Article IV consultation with Sri Lanka on June 1, 2018; a separate press release will be issued shortly.

*Press Release No. 18/212 — June 1, 2018 — IMF Communications Department*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release No. 16/262](http://www.imf.org/en/News/Articles/2015/09/14/01/49/pr16262)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/06/01/pr18212-sri-lanka-imf-executive-board-concludes-2018-article-iv-consultation_