IMF gives thumbs up for SL’s progress but cautions road ahead still difficult

Krishna Srinivasan

•  Points out signs of early recovery are seen
•  Urges to pursue fiscal and structural reforms 
•  Says hopeful there will be some conclusions down road in debt restructuring negotiations

The International Monetary Fund (IMF) this week commended Sri Lanka for going forward and being successful to a great extent to implement the “ambitious” programme; however, it cautioned that the road ahead is till bumpy.
IMF Director Asia and Pacific Department Krishna Srinivasan asserted that the programme is bearing fruit. 
When Sri Lanka embarked on this adjustment programme, it had its back to the wall but now signs of early recovery
are seen.
“The programme is delivering on what’s expected to do. Growth is picking up. Inflation is coming down; reserves are going up but the road ahead is still difficult. 
So, you have to keep pursuing those reforms, both on the fiscal side and in terms of the structural reform side, including on governance and reducing corruption. Those are areas which are very, very important,” Srinivasan said, responding to a question at the Regional Economic Outlook for Asia and Pacific.
The island nation’s real GDP expanded by 3 percent year-on-year in 2H23. March inflation was 0.9 percent versus 70 percent peak in September 2022. Reserves increased by 2.5 billion in 2023 and the primary balance reaches surplus of 0.6 percent of GDP in 2023. 
“I don’t want to jinx it because the road ahead is going to be harder but there is progress being made and both in terms of growth,” he reiterated.
According to the IMF, Sri Lanka needs to do more in its fiscal policy, in terms of building reserves, in terms of becoming resilient. Touching on the debt restructuring efforts, Srinivasan noted that although there are some setbacks on the private sector restructuring, both parties talking is a
good sign. 
“So, I’m hopeful that there will be some conclusions down the road.
I think they (restructuring efforts) are progressing well. In terms of, with the official creditors, there’s been good progress. You know, it’s been quite encouraging the news there with private creditors,” he said.
Srinivasan pointed out that the IMF does not involve in the restructuring negotiations at all but observe developments.
“We provide, you know, input to the partners who are in the negotiation, both on the macro framework and what’s falling ahead,” he added.