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Full economic recovery not yet assured: IMF team says cocluding visit to SL

27 September 2023 04:31 pm - 21     - {{hitsCtrl.values.hits}}

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The International Monetary Fund (IMF) mission team concluding its visit to Sri Lanka said that despite early signs of stabilization, full economic recovery is not yet assured.

The team led by Peter Breuer and Ms. Katsiaryna Svirydzenka said Sri Lanka has made commendable progress in implementing difficult but much-needed reforms.

“The people of Sri Lanka have shown remarkable resilience in the face of enormous challenges. Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with Q2 real GDP contracting by 3.1 percent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months.

The statment issued by the IMF team said it is importatnt to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.

The Full Statement:

“The people of Sri Lanka have shown remarkable resilience in the face of enormous challenges. Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP in the second quarter contracting by 3.1 percent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months.

“Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth. The authorities have met the program’s primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability. However, revenue mobilization gains--while improved relative to last year--are expected to fall short of initial projections by nearly 15 percent by year end, in part due to economic factors. The onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall. This could weaken the government’s ability to provide essential public services; and undermine the path to debt sustainability. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.

“Against continued uncertainty, it also remains important to rebuild external buffers by strong reserves accumulation. Building on the Central Bank of Sri Lanka’s success in controlling inflation, refraining from monetary financing will help keep inflation in check. Other challenges include maintaining cost recovery of electricity pricing.

“The government has made steady progress on structural reforms. Key legislations passed in Parliament, including the new Central Bank Act and the Anti-Corruption Act, could improve governance if implemented effectively. The IMF Governance Diagnostic report would inform future reform measures to strengthen governance when published. A new welfare benefit payment scheme was enacted with new eligibility criteria that aims to improve targeting, adequacy, and coverage of social safety nets. To ensure financial stability, steps were taken on conducting bank diagnostics, developing a roadmap for addressing banking system capital and liquidity shortfalls, and improving the bank resolution framework.

“The authorities have also made headway on regaining debt sustainability through the execution of the domestic debt restructuring and advancing discussions with external creditors. As Sri Lanka is restructuring its public debt which is in arrears, Executive Board approval of the first program review requires the completion of financing assurances reviews. These financing assurances reviews will focus on whether adequate progress has been made with debt restructuring to give confidence that it will be concluded in a timely manner and in line with the program’s debt targets.

“Discussions are on-going, and the authorities are continuing to make progress on their plans for revenue mobilization targets, anti-corruption efforts, and other important structural reforms.

“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Mr. Shehan Semasinghe, Chief of Staff to the President Mr. Sagala Ratnayaka, Secretary to the Treasury Mr. K M Mahinda Siriwardana, and other senior government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners.

“We would like to thank the authorities for the excellent collaboration during the mission. The team will continue its discussions in the context of the First Review with the goal of reaching a staff-level agreement in the near term. We reaffirm our commitment to support Sri Lanka at this difficult time.”


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  Comments - 21

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  • mohan mendis Wednesday, 27 September 2023 04:52 PM

    Victory for treacherous anti SL opposition, avoiding taxes, stopping new FDIs ! Time people rise against true enemies of the country

    This is reality Wednesday, 27 September 2023 05:02 PM

    The people are struggling for oxygen - the government is blocking the valves - and the IMF is intent on tightening the screws. What dollars can do!

    D V K THARAKA Wednesday, 27 September 2023 05:05 PM

    Nobody seems to take sufficient interest/responsibility in improving trade/business revenues. Rather they try to recover the expenditure side by scraping the existing revenues. Real task is the business growth, where experts should focus on rather than distributing the costs among the members of the population.

    Sam Silva Wednesday, 27 September 2023 05:19 PM

    It's very simple. When we spend more on non essentials and earn less and to bridge the gap we take loans. The loans are delayed or not paid. How could we have a full economic recovery. The little money we earn been spent by politicians for their comforts and overseas joy trips.

    Ranjith Wednesday, 27 September 2023 05:28 PM

    The IMF report has not specifically mentioned their meeting with the Group lead by The Leader of the Opposition.

    roni Wednesday, 27 September 2023 05:42 PM

    These are jointly manipulated prebudget tricks. This will help to strangle the masses further. Further taxation to be imposed will be justified using this IMF statement as an excuse. Why is the IMF not focusing on Government Air Travel and Hotel stay expenses with zero return/impact on such excursions

    Dee Wednesday, 27 September 2023 06:57 PM

    No chance! At the going trend after elections when the ‘majority voters’ turn the tables - collapse is eminent.

    cineha Wednesday, 27 September 2023 08:29 PM

    Beggars should not open their big mouth out of turn. When the "big boss" opened his big mouth on "aukus" in US itself this kind of a reaction was anticipated.

    Jude Wednesday, 27 September 2023 08:52 PM

    With this bunch of politicians SL will never recover economically!!

    GEGERIATRIC INDIVIDUAL INCOME TAX PAYER SINCE 1975 Wednesday, 27 September 2023 10:59 PM

    Inflation down from 70% to 2% because people cannot afford to buy even basic essentials; STARVING! Also essential medicines are not available in the market!

    Amaran Thursday, 28 September 2023 01:16 AM

    Thank You, IMF team for your visit. Please ensure CORRUPTION is totally eradicated from Sri Lanka. But please release 2nd trench of money as poor people cannot suffer any longer. UNP should also held responsible for the CENTRAL BANK BOND SCAM.

    M perera Thursday, 28 September 2023 01:19 AM

    Tax evasion and Tax exception, has always been an issue for revenue generation in SL. When Billions are lost. $54 billion held in offshore accounts from exporters in SL. What has the govment and the revenue depart done to bring this money back?

    Punchi Thursday, 28 September 2023 02:46 AM

    We are doing it all wrong. IMF money must be provided to our monks and temples for the necessary prayers and funding luxury accomodation, SUVs and good food and wine. Then the IMF money will multiply enormously and benefit us all

    Gunadasa Thursday, 28 September 2023 03:52 AM

    Thank you Ranil and CBSL governor for bringing back the economy on track. As things are looking better, now JVP wants to continue with IMF programs

    Tax Nightmare Thursday, 28 September 2023 05:04 AM

    As the country is facing a crisis all tax exemptions given so far should be removed at the next budget and no more tax exemptions should be given in future till debt restructuring period is completed. Those who oppose should be asked to pack and go to invest elsewhere. Why give tax in a country with pretty cheap labour costs.

    Nimal Thursday, 28 September 2023 07:00 AM

    There will not be any semblance of economic recovery until some constructive action is taken to improve our production. Nothing, virtually nothing has been done during the last few years regarding this matter.

    Ah Thursday, 28 September 2023 08:02 AM

    Common IMF guys SL is just striving to raise its head from BANKRUPTCY; so give a little time. Economy will revive for sure under RW and his team. What transpired at your meetings with opposition. Did you guys ask them to set aside their political differences (if they are looking after for the well being of the citizens as they proudly claim) and cooperate and support RW and his team and make it come to fruition? No end for their criticism and instigating chaotic situations. Sick and tired of these guys.

    Daily Mirror Humbug useless to give name Thursday, 28 September 2023 09:57 AM

    Those fake critics with political goals and agenda turned out to be the one's depriving IMF second franchise making country /people/ the common man to suffer and be poorer. They wanted to have shortages , making everyone to be another era of queues. They defended the tax payers absconding taxes. Said professionals will leave to foreign country because of high taxes, knowing that Australia Canada USA England had tax slabs of 35% and over on personal income. Let them have cheers now. They will one day suffer and will stand on queues . May Satan bless for their souls and may Satan help them to enjoy evil .

    Lucky Thursday, 28 September 2023 11:14 AM

    Tax evasion, Tax exemptions, and Tax collections are areas that must be acted on NOW . Heavy Corruption and gross Bribery by all Officials and Bureaucrats at all levels must be eradicated. Monies stashed abroad by scams big and small must be brought back forthwith. These factors will enhance our revenues and stifle expenses. Don't squeeze the poor any more, its the RICH that caused the Country to crash and they must NOW bear the brunt of recovery .

    Trade Unionist Thursday, 28 September 2023 12:11 PM

    We knew that the IMF delegation also met the Leader of the Opposition who were joined by Prof.Peiris, Kabir Hashim,Dr Nalaka Godahewa, Dr Harsha de Silva among others. Did Sajith and Co. just had tea with the Delegation and did not show what opposition and protests there are in all sectors in the country to the Government deal with the IMF !

    Hadira Thursday, 28 September 2023 03:40 PM

    If the Government is trying to make use of even a small amount out of IMF 2nd tranche of nearly 300 millions dollars for anything not meant for export oriented or at least local production purposes I feel we are heading for piling up dollar loans


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