Insight By Sunil Kumar

Jan15th 2024

The President’s vision for Sri Lanka has certainly been recognized by the IMF and augurs well towards the future of Sri Lanka  with  Ranil Wickremasinghe at the helm with all his political savvy as the Nation emerges from the travails of the past with no thanks to past leaders whose mismanagement becomes the cynosure of all global eyes which has left the Nation in the grip of  severe economic setbacks where the cost of living continues to skyrocket and no end appears to be in sight but an acclaim from the IMF is a comforting sign towards the future where all the numbers including tourism and financial growth appear positive.

At a recent meeting between President Ranil Wickremasinghe, Sri Lankan authorities and the International Monetary Fund (IMF) the IMF congratulated the country on completing the first review under its program.

 The IMF highlighted the positive start of the program, recognizing the challenging reforms undertaken by Sri Lanka and their significant impact on the domestic population. Directors at the executive board meeting applauded Sri Lanka’s courage in publishing the governance diagnostic, a pioneering effort in Asia.

Through its Senior Mission Chief for Sri Lanka, Peter Breuer  the IMF has noted that encouraging signs  are shown regarding the program’s impact on stabilizing the economy, particularly in policy-oriented variables and fiscal areas. A recent meeting revealed promising revenue collection, indicating the effectiveness of implemented policies since reaching a staff level agreement in the second half of 2022. The IMF has  emphasized the favourable and positive surprise in these developments, boosting confidence with the international community, official creditors and private creditors.

The IMF has observed that With respect to revenue collection, in fact,there are visible positive signs that showed very encouraging numbers that basically highlight that the policies you implemented beginning from after we reached the staff level agreement in the second half of 2022 are working, that they have the intended effect, that you’re collecting the revenue that’s needed to address the cause of the crisis. So, that really is very good news.” as quoted in a recent credible news report despite the daunting realization that changes do not happen overnight and there is quite a distance to cover before what may be a return to even a marginal normalcy but indeed an encouraging indication that Sri Lanka is on the right track .

 Sri Lanka’s success in reducing inflation significantly has been observed by the IMF, attributing it to the government’s efforts in monetary policy and scaling back monetary financing. Positive outcomes, such as an increase in reserves, were also observed. The ongoing governance reforms were acknowledged as positive indicators, contributing to tentative economic growth in the third quarter, particularly in capital formation and machinery.

As the IMF plans its upcoming formal review and Article 4 consultation, key areas of focus include the new public financial management law, potential conflicts with the public-private partnership law, electricity tariffs and urgent preparations for property taxation. The IMF stressed the importance of perseverance with ongoing reforms, addressing fiscal issues and advancing governance agendas.

The meeting also highlighted the urgency of addressing fiscal matters, including passing amendments to the Banking Act and recapitalizing the banking sector.

In essence the IMF commendation that Sri Lanka’s partnership on capacity development, emphasizing the importance of enhancing the skills of the civil service for the success of ongoing reforms becomes viably important as the program aims to build capacity in the civil service, crucial for the implementation of reforms.

State Minister for Finance Mr. Shehan Semasinghe, President’s Senior Advisor on Economic Affairs Dr. R.H.S. Samaratunga, Central Bank Governor Dr. Nandalal Weerasinghe,  Secretary of the Ministry of Finance Mr. Mahinda Siriwardena and other officials also participated at this event where the importance of this has brought on a significant overview by the IMFwith respect to the Nation’s progress since the troubling events of the past  where all kudos go to the President, his team  and his significant vision towards the future.

As the optimist would say “There is hope after all and all is not lost!