## IMF Executive Board Completes the Sixth Review of Sri Lanka’s Extended Arrangement under the Extended Fund Facility

_IMF News, November 1, 2019_

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**Canonical URL:** [IMF Executive Board Completes the Sixth Review of Sri Lanka’s Extended Arrangement under the Extended Fund Facility](https://www.imf.org/en/news/articles/2019/11/01/pr19390-sri-lanka-imf-executive-board-completes-6th-review-extended-arrangement-eff)

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## Bibliographic details
- Published: November 1, 2019

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### Review outcome and disbursement
- The Executive Board completed the Sixth Review of Sri Lanka’s economic performance under the program supported by an extended arrangement under the Extended Fund Facility (EFF) on November 1, 2019.
- A waiver of non‑observance was granted for the end‑June 2019 performance criterion on the primary balance.
- The completion of the Sixth review enabled the disbursement of SDR 118.5 million (about US$164 million).
- Total disbursements under the arrangement following this review amounted to SDR 952.23 million (about US$1.31 billion).

### Program size, timing, and extensions
- Sri Lanka’s extended arrangement was approved on June 3, 2016, in the amount of about SDR 1.1 billion (US$1.5 billion, or 185 percent of quota in the IMF at that time of approval of the arrangement).
- On May 13, 2019, the Executive Board approved an extension of the arrangement by one additional year, until June 2, 2020, with rephasing of remaining disbursements.

### Economic outlook and risks
- Growth is projected to strengthen to 3.5 percent in 2020, from 2.7 percent in 2019, as tourist arrivals and related activities gradually recover following the Easter Sunday terrorist attacks.
- Important downside risks remain amid heightened external and domestic uncertainty.

### Fiscal policy, debt, and public finance recommendations
- Sustaining fiscal policy discipline is emphasized as critical to strengthen resilience and support growth.
- Mobilizing revenue will be central to place public debt on a downward path while preserving space for social and investment spending.
- The new fiscal rule framework and the establishment of an independent public debt management agency over the medium term are expected to help anchor public debt sustainability.
- Advancing State-Owned Enterprise (SOE) reforms in the electricity sector is highlighted as critical to reduce fiscal risks.

### Monetary policy and reserves
- The Central Bank of Sri Lanka should maintain a data dependent monetary policy.
- The new Central Bank Act is described as a milestone reform towards the adoption of flexible inflation targeting.
- Efforts to build reserves should be sustained to protect the economy against shocks, allowing for exchange rate flexibility in the event of market pressures.

### Financial sector and safeguards
- Sri Lanka has made important progress in strengthening the AML/CFT regime.
- Recommended actions include harmonizing regulation and supervision of financial institutions, strengthening the macroprudential policy framework, and upgrading the contingency framework to safeguard financial stability.

### Structural reforms and inclusive growth
- Further progress in the structural reform agenda is essential to bolster competitiveness and achieve stronger and inclusive growth.
- Policy focus areas listed:
  - Liberalizing trade by gradually removing para tariffs while addressing their revenue impact.
  - Strengthening the governance and anti corruption framework.
  - Promoting women’s economic empowerment.
  - Building climate resilience.
  - Enhancing social protection.

*Press Release No. 19/390, November 1, 2019.*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [Sri Lanka and the IMF](http://www.imf.org/external/country/LKA/index.htm)
- [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release No. 16/262](https://www.imf.org/en/News/Articles/2019/05/13/pr19162-sri-lanka-exec-board-5th-rev-ext-arrange-under-eff-grants-waivers-approves-disburse)
- [http://www.imf.org/en/about/factsheets/sheets/2016/08/01/20/56/extended-fund-facility](http://www.imf.org/en/about/factsheets/sheets/2016/08/01/20/56/extended-fund-facility)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/11/01/pr19390-sri-lanka-imf-executive-board-completes-6th-review-extended-arrangement-eff_