The International Monitory Fund (IMF) following the completion of the review of Sri Lanka’s economic performance will release funds amounting to US $ 162.6 million, according to a statement issued by the IMF. This grant is under the Extended Fund Facility (EFF) which was approved in June this year.
Acting Chair and Deputy Managing Director, Tao Zhang said, “Sri Lanka’s performance under the Fund-supported program has been broadly satisfactory despite challenging circumstances. Macroeconomic and financial conditions have begun to stabilize, inflation has trended down, and the balance of payments has improved. However, international reserves remain below comfortable levels.”
The statement said that the 2017 Budget aims to strengthen government finances through revenue mobilisation. And it is further hopeful that the new Inland Revenue Act due to be introduced early next year would result in a more efficient, transparent, and broad-based tax system. Complementary structural reforms in tax administration, public financial management, and governance and oversight of State-owned enterprises are critical for durable fiscal consolidation. The IMF by now has released a total of US $ 325.1 million to Sri Lanka under this extended facility, while the total funding which the IMF is expected to grant is US $ 1.45 billion. “While inflation has abated, credit growth remains strong. The Central Bank indicates its readiness to tighten the monetary policy stance further, if inflationary pressures resurge or credit growth persists.
The authorities intend to continue building up reserves through outright purchases while allowing for greater exchange rate flexibility,” the acting chair, Tao Zhang said.
The banking sector is currently well capitalized. Steps are being taken to find a resolution mechanism for distressed financial institutions. There is a need to strengthen the supervisory and regulatory framework, and identify and mitigate vulnerabilities in the financial sector, particularly with regard to non-banks and State-owned banks, the statement said.