Colombo, Sri Lanka – June 30, 2022:
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.
At the end of the mission, Messrs. Breuer and Nozaki issued the following
statement:
“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. During the in-person visit, the team
witnessed some of the hardships currently faced by the Sri Lankan
people, especially the poor and vulnerable who are affected
disproportionately by the crisis. We reaffirm our commitment to support
Sri Lanka at this difficult time in line with the IMF’s policies.
“The authorities’ monetary, fiscal policy and other actions since early
April were important first steps to address the crisis. The team had
constructive and productive discussions with the Sri Lankan authorities
on economic policies and reforms to be supported by an IMF
Extended Fund Facility (EFF) arrangement. The staff team and the authorities
made significant progress on defining a macroeconomic and structural
policy package. The discussions will continue virtually with a view to
reaching a staff-level agreement on the EFF arrangement
in the near term. Because public debt is assessed as unsustainable,
Executive Board approval would require adequate financing assurances from
Sri Lanka’s creditors that debt sustainability will be restored.
“In this context, discussions focused on designing a comprehensive economic
program to correct the macroeconomic imbalances, restore public debt
sustainability, and realize Sri Lanka’s growth potential. Discussions
advanced substantially during the mission, including on the need to reduce
the elevated fiscal deficit while ensuring adequate protection for the poor
and vulnerable. Given the low level of revenues, far-reaching tax reforms
are urgently needed to achieve these objectives. Other challenges that need
addressing include containing rising levels of inflation, addressing the
severe balance of payments pressures, reducing corruption vulnerabilities
and embarking on growth-enhancing reforms. The authorities have made
considerable progress in formulating their economic reform program and we
are looking forward to continuing the dialogue with them.
“The IMF team 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, and other senior government and CBSL officials. It
also met with Parliamentarians, representatives from the private sector,
civil society organizations, and development partners.
“We would like to thank the authorities for the candid approach and warm
hospitality and are looking forward to continuing our discussions in
support of Sri Lanka and its people.”
