IMF, Lanka Edge Closer with Staff-Level Agreement

The island nation will have access to about $330 million in financing once the review is approved…reports Asian Lite News

An official confirmed on Friday that Sri Lanka has achieved a staff-level agreement concerning the initial review of its Extended Fund Facility (EFF) Arrangement with the International Monetary Fund (IMF).

This development paves the way for the country to access the upcoming disbursement of funds as part of its $3 billion bailout program.

The island nation will have access to about $330 million in financing once the review is approved, Xinhua news agency quoted IMF Senior Mission Chief for Sri Lanka Peter Breuer as saying at a virtual press briefing.

IMF staff and Sri Lankan authorities have reached a staff-level agreement on economic policies to conclude the first review of the IMF-supported program. Following IMF Management & Executive Board approval, Sri Lanka will be able to access ~$330 million. https://t.co/rrVULL34Lu pic.twitter.com/tVmBRQzuDL
— IMF (@IMFNews) October 19, 2023

Sri Lankan authorities remain committed to the reform agenda under the EFF and their reform efforts have been commendable, including rapid disinflation and a significant fiscal adjustment expected by the end of this year, according to a statement issued earlier by Breuer and Deputy Mission Chief Katsiaryna Svirydzenka.

Inflation is down from a peak of 70 per cent in September 2022 to 1.3 per cent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased, said the statement.

Despite these early signs of stabilisation, full economic recovery is not yet assured, as growth momentum remains subdued, with real GDP in the second quarter contracting by 3.1 per cent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals, according to the IMF.

Sustaining the reform momentum is of paramount importance in steering the economy towards a sustained recovery and fostering stable, inclusive economic growth, said the IMF.

The IMF in March this year approved a 48-month extended arrangement under EFF of about $3 billion to support Sri Lanka’s economic policies and reforms.