{
  "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Sri Lanka and Completes the Second Review Under the Extended Fund Facility",
  "publication": "IMF News, June 12, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/06/12/pr-24214-sri-lanka-imf-concludes-2024-article-iv-consultation-completes-2nd-review-under-eff",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) completed the second review under the 48-month Extended Fund Facility (EFF) Arrangement, allowing the authorities to draw SDR 254 million (about US$336 million).",
  "publishDate": "2024-06-12",
  "sections": [
    {
      "heading": "Program approval and disbursements",
      "content": "- The Executive Board completed the second review under the 48-month Extended Fund Facility (EFF) Arrangement, allowing the authorities to draw SDR 254 million (about US$336 million).\n- Total IMF financial support disbursed so far is SDR 762 million (about US$1 billion).\n- The EFF arrangement was approved on March 20, 2023 in an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion).\n- The first review of the EFF was completed on December 12, 2023 with disbursements of SDR 254 million (about US$337 million)."
    },
    {
      "heading": "Program objectives and policy focus",
      "content": "- The EFF-supported program aims to:\n  - restore macroeconomic stability and debt sustainability,\n  - mitigate the economic impact on the poor and vulnerable,\n  - rebuild external buffers,\n  - safeguard financial sector stability,\n  - strengthen governance and growth potential.\n- The 2024 Article IV Consultation focused on reforms to restore macroeconomic stability and debt sustainability, maintain price stability, safeguard financial stability, rebuild external buffers, and implement growth-oriented structural reforms, including by strengthening governance."
    },
    {
      "heading": "Performance under the program and vulnerabilities",
      "content": "- Performance under the program has been strong: all quantitative targets for end-December 2023 were met, except the indicative target on social spending.\n- Most structural benchmarks due by end-April 2024 were either met or implemented with delay.\n- Signs of economic recovery:\n  - Real GDP expanded by 3 percent (y-o-y) in the second half of 2023.\n  - May 2024 inflation was 0.9 percent.\n  - Gross international reserves increased to US$5.5 billion by end-April 2024.\n  - The primary balance improved to a surplus with tax revenue increasing to 9.8 percent of GDP in 2023.\n- Banking sector: improvements in non‑performing loans, but pockets of vulnerabilities remain.\n- The recovery remains gradual; the path to debt sustainability is described as “knife-edged.”\n- Risks:\n  - Domestic: waning reform momentum, especially on revenue mobilization.\n  - External: intensified regional conflicts, commodity price volatility, global slowdown.\n  - Slow progress in debt restructuring could widen financing gaps."
    },
    {
      "heading": "Outlook and projections",
      "content": "- Growth is projected to recover moderately in 2024-25 given constrained bank credit and fiscal consolidation, while facing uncertainties around the debt restructuring and policy direction following the elections.\n- Inflation is expected to temporarily increase due to one-off factors.\n- The current account is expected to remain positive in 2024, driven by improved tourist arrivals and remittances."
    },
    {
      "heading": "Policy recommendations and priorities (as stated by IMF management and Directors)",
      "content": "- Fiscal policy:\n  - Sustained revenue mobilization efforts.\n  - Promptly finalize debt restructuring in line with program targets.\n  - Protect social and capital spending.\n  - Advance public financial management to enhance fiscal discipline.\n  - Strengthen the debt management framework.\n- Monetary policy:\n  - Prioritize price stability.\n  - Sustain commitment to refrain from monetary financing.\n  - Safeguard central bank independence.\n  - Continue exchange rate flexibility and gradually phase out balance of payments measures to rebuild external buffers and facilitate external rebalancing.\n- Financial sector:\n  - Restore bank capital adequacy.\n  - Strengthen governance and oversight of state-owned banks to revive credit growth.\n  - Swiftly complete restructuring of remaining domestic law and foreign currency loans.\n  - Ensure adequate recapitalization of commercial and state‑owned banks.\n  - Implement recently enacted Banking Act amendments effectively.\n  - Strengthen the anti‑money laundering and counter‑terrorism financing framework.\n- Structural and governance reforms:\n  - Steadfast implementation of governance reforms and the authorities’ action plan from the Governance Diagnostic Report.\n  - Further trade liberalization to promote exports and foreign direct investment.\n  - Labor reforms to upgrade skills and increase female labor force participation.\n  - State‑owned enterprise reforms to improve efficiency and fiscal transparency, contain fiscal risks, and promote a level playing field for the private sector.\n  - Prioritize reforms to liberalize trade, improve the investment climate and SOE efficiency, reduce gender gaps in the labor market, and mitigate climate vulnerabilities.\n- Debt restructuring:\n  - Swift finalization of the Memorandum of Understanding with the Official Creditor Committee and final agreements with the Export‑Import Bank of China.\n  - Seek comparable, transparent, and timely restructurings with external private creditors consistent with program targets."
    },
    {
      "heading": "Executive Board Assessment (summarized)",
      "content": "- Directors commended strong performance under the Fund‑supported program and noted reforms are bearing fruit: recovery starting, low inflation, improving revenue, and accumulating reserves.\n- Important vulnerabilities and uncertainties remain, including ongoing debt restructuring and upcoming elections.\n- Directors called for continued strengthening of macroeconomic policies to restore economic stability and debt sustainability and to sustain reform momentum for long‑term inclusive growth.\n- Specific director recommendations echoed management’s priorities on revenue measures, tax administration reforms, limiting and making tax exemptions more transparent, protecting growth‑enhancing and social spending, and improving the social safety net.\n- Directors welcomed submission of the new Public Financial Management bill to Parliament and progress on cost‑recovery in energy pricing."
    },
    {
      "heading": "Selected economic indicators (highlights from 2021–2029 table)",
      "content": "- Real GDP:\n  - 2021: 4.2\n  - 2022: -7.3\n  - 2023: -2.3\n  - 2024 (Prel.): 2.0\n  - 2025 (Projections): 2.7\n  - 2026: 3.0\n  - 2027: 3.1\n- Inflation (average, Colombo CPI):\n  - 2021: 6.0\n  - 2022: 45.2\n  - 2023: 17.4\n  - 2024 (Prel.): 7.0\n  - 2025: 5.8\n  - 2026: 5.4\n  - 2027: 5.2\n  - 2028: 5.1\n  - 2029: 5.0\n- National savings (percent of GDP):\n  - 2021: 33.0\n  - 2022: 27.6\n  - 2023: 33.9\n  - 2024: 32.5\n- National investment (percent of GDP):\n  - 2021: 36.7\n  - 2022: 28.6\n  - 2023: 30.8\n  - 2024: 32.1\n- Current account balance (in millions of U.S. dollars):\n  - 2021: -3,285\n  - 2022: -744\n  - 2023: 2,644\n  - 2024: 412\n  - 2025: -926\n- Gross official reserves (end of period, in millions of U.S. dollars):\n  - 2021: 3,139\n  - 2022: 1,898\n  - 2023: 4,387\n  - 2024: 5,605\n  - 2025: 7,174\n  - 2026: 9,262\n  - 2027: 13,466\n- Usable Gross official reserves (end of period):\n  - 2021: 1,565\n  - 2022: 462\n  - 2023: 2,951\n  - 2024: 4,169\n- External debt (public and private, in billions of U.S. dollars):\n  - 2021: 58.4\n  - 2022: 57.4\n  - 2023: 52.7\n  - 2024: 53.6\n  - 2025: 55.6\n- Public debt (in percent of GDP):\n  - 2021: 114.8\n  - 2022: 126.3\n  - 2023: 115.7\n  - 2024: 114.2\n  - 2025: 113.1\n\nSource: IMF Executive Board Concluding Statement and Press Release, June 12, 2024.\n\n---\n\n Content in this bundle\n\n- Pr24214 Sri Lanka Tamil\n  - Pr24214 Sri Lanka Tamil (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Pr24214 Sri Lanka Tamil (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- PRESS CENTER\n- Press Release\n- Press Release\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/06/12/pr-24214-sri-lanka-imf-concludes-2024-article-iv-consultation-completes-2nd-review-under-eff"
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    "Published: June 12, 2024",
    "The Executive Board completed the second review under the 48-month Extended Fund Facility (EFF) Arrangement, allowing the authorities to draw SDR 254 million (about US$336 million).",
    "Total IMF financial support disbursed so far is SDR 762 million (about US$1 billion).",
    "The EFF arrangement was approved on March 20, 2023 in an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion).",
    "The first review of the EFF was completed on December 12, 2023 with disbursements of SDR 254 million (about US$337 million).",
    "The EFF-supported program aims to:",
    "The 2024 Article IV Consultation focused on reforms to restore macroeconomic stability and debt sustainability, maintain price stability, safeguard financial stability, rebuild external buffers, and implement growth-oriented structural reforms, including by strengthening governance.",
    "Performance under the program has been strong: all quantitative targets for end-December 2023 were met, except the indicative target on social spending.",
    "Most structural benchmarks due by end-April 2024 were either met or implemented with delay.",
    "Signs of economic recovery:",
    "Banking sector: improvements in non‑performing loans, but pockets of vulnerabilities remain.",
    "The recovery remains gradual; the path to debt sustainability is described as “knife-edged.”",
    "Risks:",
    "Growth is projected to recover moderately in 2024-25 given constrained bank credit and fiscal consolidation, while facing uncertainties around the debt restructuring and policy direction following the elections.",
    "Inflation is expected to temporarily increase due to one-off factors.",
    "The current account is expected to remain positive in 2024, driven by improved tourist arrivals and remittances.",
    "Fiscal policy:",
    "Monetary policy:",
    "Financial sector:",
    "Structural and governance reforms:",
    "Debt restructuring:",
    "Directors commended strong performance under the Fund‑supported program and noted reforms are bearing fruit: recovery starting, low inflation, improving revenue, and accumulating reserves.",
    "Important vulnerabilities and uncertainties remain, including ongoing debt restructuring and upcoming elections.",
    "Directors called for continued strengthening of macroeconomic policies to restore economic stability and debt sustainability and to sustain reform momentum for long‑term inclusive growth.",
    "Specific director recommendations echoed management’s priorities on revenue measures, tax administration reforms, limiting and making tax exemptions more transparent, protecting growth‑enhancing and social spending, and improving the social safety net.",
    "Directors welcomed submission of the new Public Financial Management bill to Parliament and progress on cost‑recovery in energy pricing.",
    "Real GDP:",
    "Inflation (average, Colombo CPI):",
    "National savings (percent of GDP):",
    "National investment (percent of GDP):",
    "Current account balance (in millions of U.S. dollars):",
    "Gross official reserves (end of period, in millions of U.S. dollars):",
    "Usable Gross official reserves (end of period):",
    "External debt (public and private, in billions of U.S. dollars):",
    "Public debt (in percent of GDP):",
    "**Pr24214 Sri Lanka Tamil**",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Press Release](https://www.imf.org/en/News/Articles/2023/03/20/pr2379-imf-executive-board-approves-under-the-new-eff-arrangement-for-sri-lanka)",
    "[Press Release](https://www.imf.org/en/News/Articles/2023/12/12/pr23439-sri-lanka-imf-executive-board-completes-first-review-under-eff-arrangement)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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