{ "title": "Press Briefing of the First Review of Sri Lanka’s Extended Fund Facility Arrangement", "publication": "IMF News, October 22, 2023", "sourceUrl": "https://www.imf.org/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka", "canonical": "https://www.imf.org/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka", "overlayPath": "/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/index.md", "summary": "Press Briefing of the First Review of Sri Lanka’s Extended Fund Facility Arrangement", "publishDate": "2023-10-22", "sections": [ { "heading": "Program status and financial access", "content": "- IMF staff reached a staff-level agreement with the Sri Lankan authorities on the first review under the Extended Fund Facility Arrangement; the agreement is subject to approval by IMF management and its Executive Board.\n- Access upon Board approval: about $330 million, bringing total IMF financial support disbursed to about $660 million out of roughly 3 billion that would be available over the four-year life of the program.\n- Agreement conditional on:\n - Implementation by the authorities of all prior actions.\n - Completion of the Financing Assurances Reviews confirming sovereign debt is being restructured in a timely manner and in line with the program's debt targets." }, { "heading": "Macro performance and outlook", "content": "- Program performance at end June was satisfactory.\n - All quantitative performance criteria were met except on expenditure arrears.\n - All indicative targets were met except on tax revenues.\n - Most structural benchmarks were either met or met with delay.\n- Economic indicators and risks:\n - Rapid disinflation noted, but growth momentum remains subdued and recovery is not yet assured.\n - External position weakened due to slow progress on debt restructuring; reserve accumulation slowed in recent months.\n - Agreeing on debt treatments consistent with restoring debt sustainability quickly is key to resolving uncertainty that is constraining businesses and external financing.\n - Delays in creditor agreements risk worsening the economic outlook, widening financial gaps, hindering return to sustainable growth, and reducing capacity to pay." }, { "heading": "Fiscal policy, revenue mobilization, and tax measures", "content": "- Authorities committed to increase revenues, improve governance and tax administration, and actively eliminate evasion.\n- Revenue performance:\n - Staff noted that revenue mobilization is expected to fall short of projections by the end of the year by 15 percent.\n - Objective: achieve revenue that exceeds 12% of GDP (noted as program objective in discussion).\n- Policy tools discussed:\n - Revenue-based fiscal consolidation to narrow the gap between expenditures and revenues.\n - Property tax and wealth/property tax measures are in the program design; property tax expected to become a key source of additional revenue in 2025 (implementation requires time and preparatory work).\n - Authorities are working on compensating measures and tax-administration reforms to improve compliance, broaden the tax base, and ensure equity." }, { "heading": "Governance, anti-corruption, and structural reforms", "content": "- Governance Diagnostic Report:\n - Authorities published the Governance Diagnostic Report on time; Sri Lanka is the first country in Asia to do so.\n - The report contains many recommendations; authorities committed to implement key recommendations and to develop an action plan to address corruption risks and strengthen accountability.\n- Structural reforms highlighted:\n - Cost recovery in energy pricing to mitigate fiscal risks from state-owned enterprises.\n - Strengthening social safety nets to protect the poor and vulnerable.\n - Structural reforms to make the electricity sector more efficient and improve SOE governance to lower costs over the medium and long term." }, { "heading": "Social protection, targeting, and distributional concerns", "content": "- Social safety net is a core pillar of the program:\n - Program commits to raise the social spending floor and improve targeting of beneficiaries.\n - Authorities developed a social registry intended to be dynamic; grievance procedures exist for those who believe they were excluded or misclassified.\n - IMF engagement includes recommendations to strengthen targeting, adequacy, and coverage.\n- Policy design intent:\n - Tariff adjustments (e.g., electricity) are considered necessary to eliminate sector losses that become fiscal burdens on taxpayers, including the poor.\n - Mitigation of adverse impacts on the poor to be achieved through strengthened social safety net measures." }, { "heading": "Debt restructuring, creditors, and the Financing Assurances Review", "content": "- Debt treatment process:\n - Critical next step after the domestic debt operation: secure agreement with official creditors on a debt treatment consistent with program parameters and debt targets.\n - IMF took note of a tentative agreement between Sri Lanka and the Export Import Bank of China; IMF will analyze details when received.\n - Negotiations between commercial creditors and Sri Lanka are ongoing.\n- IMF role and standards:\n - IMF will monitor whether agreed treatments are compliant with program debt targets (debt stock, debt service, and required debt relief within the program period).\n - Sri Lanka committed to principles of parity and transparency; these principles are important for creditor participation and are of interest to the IMF.\n- Financing Assurances Review (FAR):\n - FAR will assess whether adequate progress has been made with debt restructuring to give confidence that restructuring will be concluded in a timely manner and in line with program debt targets.\n - Adequate progress for FAR: demonstration of a clear path to restoring debt sustainability." }, { "heading": "Process, timing, and comparisons", "content": "- Timeline references:\n - Staff-level agreement for the program was reached on September 1st, 2022 (contextual reference).\n - The IMF Executive Board considered the program on March 20th, 2023 (contextual reference).\n- Comparisons and sequencing:\n - IMF staff noted that securing financing assurances in recent sovereign restructurings (e.g., Chad, Zambia, Sri Lanka, Ghana) has generally become faster over time, influenced by Global Sovereign Debt Roundtable discussions.\n- Next steps before Board consideration:\n - Authorities must implement agreed prior actions.\n - Completion of Financing Assurances Reviews demonstrating adequate progress on debt restructuring." }, { "heading": "Communications and transparency", "content": "- Staff report and details:\n - The specifics of the prior actions and other program details will be published when the staff report is released after IMF Executive Board consideration.\n- Press logistics:\n - Recording and transcript of the briefing will be posted on imf.org.\n\nParticipants: HUONG LAN “PINKY” VU (Moderator), PETER BREUER (Senior Mission Chief for Sri Lanka), KATSIARYNA SVIRYDZENKA (Deputy Mission Chief for Sri Lanka), SARWAT JAHAN (Resident Representative in Sri Lanka).\n\nPress Briefing date: October 21, 2023.\n\n---\n\n\n References\n\n- Sri Lanka and the IMF\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka" } ], "bullets": [ "[Markdown version](/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/index.md)", "[Structured JSON version](/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/index.json)", "[Bundle manifest](/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/bundle-manifest.json)", "Published: October 22, 2023", "IMF staff reached a staff-level agreement with the Sri Lankan authorities on the first review under the Extended Fund Facility Arrangement; the agreement is subject to approval by IMF management and its Executive Board.", "Access upon Board approval: about $330 million, bringing total IMF financial support disbursed to about $660 million out of roughly 3 billion that would be available over the four-year life of the program.", "Agreement conditional on:", "Program performance at end June was satisfactory.", "Economic indicators and risks:", "Authorities committed to increase revenues, improve governance and tax administration, and actively eliminate evasion.", "Revenue performance:", "Policy tools discussed:", "Governance Diagnostic Report:", "Structural reforms highlighted:", "Social safety net is a core pillar of the program:", "Policy design intent:", "Debt treatment process:", "IMF role and standards:", "Financing Assurances Review (FAR):", "Timeline references:", "Comparisons and sequencing:", "Next steps before Board consideration:", "Staff report and details:", "Press logistics:", "[Sri Lanka and the IMF](http://www.imf.org/external/country/LKA/index.htm)", "[Transcripts](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/index.md", "json": "/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/index.json", "bundleManifest": "/en/news/articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T02:26:42.982Z" }