Govt. says deal reached with IMF to continue program without any changes

President Anura Kumara Dissanayake with visiting IMF officials  

• IMF representatives who visited Sri Lanka to assess Cyclone Ditwah damage hold talks with President AKD
• President tells Rs. 500 b to protect rural livelihoods and restore income-generating activities does not in any way signify a departure from proper financial management or fiscal responsibility
• PMD says IMF representatives commend Govt.’s program to rebuild while confronting challenges of disaster

The Government yesterday said it has reached an agreement with the International Monetary Fund (IMF) to continue with the $ 3 billion worth four-year Extended Fund Facility (EFF) program without any changes. 

The decision was disclosed by the President’s Media Division (PMD) following a meeting between President Anura Kumara Dissanayake and a visiting IMF delegation, including Director – Asia and Pacific Department Krishna Srinivasan, Deputy Director Sanjaya Panth, and Mission Chief for Sri Lanka Evan Papageorgiou.

The PMD announcement comes amidst calls by the Opposition that the existing program with the IMF must be revisited and revised following the devastation caused by Cyclone Ditwah.

Via its Rapid Financing Instrument (RFI), the IMF last month released $ 206 million as emergency support to help address payments and financial hardships caused by Cyclone Ditwah.

Since March 2023, under the EFF program, Sri Lanka has received support worth $ 1.74 billion, whilst a further $ 347 million is due upon completion of the Executive Board review.

The IMF delegation, which arrived in the country on 22 January, travelled across the country to observe first-hand the damage caused by Cyclone Ditwah and met with communities affected by its impact.

The PMD said the representatives expressed their regret over the disaster, which occurred at a time when Sri Lanka’s economy was gradually recovering, and over the severe hardships faced by the people as a result. 

“Nevertheless, they commended the Government’s swift actions to provide relief to affected communities, develop infrastructure, and restore normalcy to people’s lives while confronting the challenges posed by the disaster. They further noted that many members of the public they had spoken to had expressed appreciation for the manner in which the Government had responded, describing it as a significant achievement,” the PMD said. 

The IMF representatives also pointed out that the strong fiscal discipline maintained by the Sri Lankan Government over the past year had been a key factor in addressing this challenge. They noted that the Government’s ability to present a supplementary estimate of Rs. 500 billion was made possible by a surplus in the Treasury, describing this as a highly commendable development.

Emphasising that Sri Lanka is currently moving in the right economic direction despite facing a severe disaster situation, the IMF representatives stated that there would be no changes to the agreement relating to the EFF program being implemented with Sri Lanka. They further indicated that discussions relating to the release of the sixth tranche under the program would resume in March.

President Dissanayake noted that the disaster had most severely affected poor rural communities, with rural infrastructure and livelihoods suffering extensive damage. He stated that, accordingly, Rs. 500 billion had been allocated to protect rural livelihoods and restore income-generating activities.

The President further emphasised that this measure does not in any way signify a departure from proper financial management or fiscal responsibility.

He stated that the Government’s objective is to ensure that the gains reflected in macroeconomic indicators genuinely reach ordinary citizens and that priority is being given to rebuilding the lives of people who have endured prolonged hardship due to events such as the Easter Sunday attacks and the recent economic collapse. The President added that all future Government programs have been planned in line with this direction and that Sri Lanka expects the continued support of the IMF in this regard.

“Both parties also agreed to continue implementing the EFF program without making any changes to the existing agreement,” the PMD said.

Representing the Government at the meeting were Labour Minister and Economic Development Deputy Minister Dr. Anil Jayantha Fernando, Finance Ministry Secretary Dr. Harshana Suriyapperuma, Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe, and Senior Economic Adviser to the President Duminda Hulangamuwa, along with several other officials. IMF Resident Representative Martha Woldemichael was also associated during the discussion.