• SJB MP Dr. Harsha de Silva cries foul over Parliamentary Oversight Committee on Public Finance being denied access to Govt.’s-IMF Staff-Level Agreement but made available to others
• State Minister of Finance Semasinghe dismisses existence of a document containing IMF proposals Says it is only an understanding of actions that need to be completed before any formal approval by IMF Executive Board
• Harsha who chairs COPF insists initial refusal followed by denial of a written agreement shows Govt.’s disrespect to Parliament
• Alleges move an attempt to undertake economic reforms through various committees that have no legal authority

By Darshana Abayasingha

SJB MP Dr. Harsha de Silva yesterday expressed serious concern over the fact that proposals from the International Monetary Fund (IMF) were not shared with the Parliamentary Oversight Committee on Public Finance (COPF) which he chairs but made available to various others.

He told the Daily FT that despite multiple requests, the IMF Staff-Level Agreement with annexes on specific tax changes have not been shared or discussed with the COPF. It was “turned down under the pretext of sensitive information”. However, de Silva said, it has come to light that the proposals have been discussed at certain committees appointed by the President.

In an apparent rebuttal to SJB MP, State Minister of Finance Shehan Semasinghe effectively dismissed the existence of such a document and stated that “SLA is not a document but an understanding between the Government and the IMF staff.

 The actions that need to be completed before any formal approval by the IMF Executive Board are being discussed with Government authorities,” claimed Semasinghe, denying the document is being given out to various individuals.

De Silva in response had then questioned the legal and ethical basis to release such ‘sensitive information’ to private individuals in various committees, and not the parliamentary committee.

“Having refused to discuss the SLA with the COPF and now to say that such a document does not exist is an insult to the Parliamentary Committee. It shows disrespect for Parliament. It is also an attempt to undertake economic reforms through various committees that have no legal authority,” de Silva alleged in his comments to the Daily FT. He emphasised the matter would be taken up further when the COPF meets next.

On 1 September, the Government and the IMF reached the SLA to support the country’s economic policies with a 48-month Extended Fund Facility of about $ 2.9 billion.

At a meeting with the visiting IMF delegation, the President Ranil Wickremesinghe described the SLA as an important step in the history of Sri Lanka. “Not only rising from the bankruptcy crisis and the debt moratorium, it (SLA) is also key to ensure that our social sectors are protected and both our economic and social aspect of our lifestyle will certainly not have any further setbacks.”

A day later, Prime Minister Dinesh Gunawardena formally updated Parliament about the SLA. He also said the Government will further keep the Parliament informed about the agreement reached with the IMF.

IMF Managing Director Kristalina Georgieva described the SLA as “an important step forward for Sri Lanka”.

The objectives of Sri Lanka’s new Fund-supported program are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.

Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps. Financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors are crucial before the IMF can provide financial support to Sri Lanka.

As per the IMF the key elements of the proposed program are:

• Raising fiscal revenue to support fiscal consolidation. Starting from one of the lowest revenue levels in the world, the program will implement major tax reforms. These reforms include making personal income tax more progressive and broadening the tax base for corporate income tax and VAT. The program aims to reach a primary surplus of 2.3% of GDP by 2025
• Introducing cost-recovery based pricing for fuel and electricity to minimise fiscal risks arising from State-owned enterprises. The team welcomed the authorities already announced substantial revenue measures and energy pricing reforms
• Mitigating the impact of the current crisis on the poor and vulnerable by raising social spending, and improving the coverage and targeting of social safety net programs
• Restoring price stability through data-driven monetary policy action, fiscal consolidation, phasing out monetary financing, and stronger Central Bank autonomy that allow pursuing a flexible inflation targeting regime. A new Central Bank Act is a cornerstone of this strategy
• Rebuilding foreign reserves through restoring a market-determined and flexible exchange rate, supported by the comprehensive policy package under the program
• Safeguarding financial stability by ensuring a healthy and adequately capitalised banking system, and by upgrading financial sector safety nets and regulatory standards with a revised Banking Act 
• Reducing corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, and conducting an in-depth governance diagnostic, supported by IMF technical assistance

In a related development, President’s Chief of Staff and Senior Advisor on National Security Sagala Ratnayake on Friday met with resident officials of the International Monetary Fund (IMF) on fast-tracking debt restructuring.

Discussions took place when outgoing IMF Resident Representative for Sri Lanka Tubagus Feridhanusetyawan and incoming IMF Resident Representative for Sri Lanka Sarwat Jahan called on Ratnayake yesterday at the Presidential Secretariat.

They exchanged views on prior action and debt restructuring. Ratnayake assured the IMF team that he would brief President Ranil Wickremesinghe on the matters that were discussed at this meeting and convey his response to them.

Another crucial discussion with Sri Lanka’s creditors is scheduled to be held on 3 November. Debt restructuring in Sri Lanka is on the agenda to be discussed at length during this discussion. President’s Senior Adviser on Economic Affairs R.H.S. Samaratunga also joined the discussion. 

New CBSL regime prints more money than the former

Approval of Govt. moves up but only to extreme low level of 10%