IMF gives thumbs up to Sri Lanka’s reform progress, stresses need to sustaining momentum

IMF Communications Director Julie Kozack

• IMF Communications Director Julie Kozack confirms it is closely engaged with Sri Lankan authorities to assess key prior actions —15 % electricity tariff hike and revised bulk supply guidelines 
• Says $ 344 m IMF tranche pending Executive Board approval following review
• Welcomes governance reform plan, including procurement and asset recovery laws 
• Commends Sri Lanka’s rebound in growth, low inflation, rising reserves, and improved revenue
• Cautions on heightened global uncertainty, stressing need to maintain reform momentum 
• Notes IMF continues close engagement with Sri Lankan authorities to support EFF program completion
• In a first in 20 years IMF’s First Deputy Managing Director arrives in SL tomorrow 

The International Monetary Fund (IMF) this week commended Sri Lanka’s continued progress under its economic reform program, whilst stressing the importance of maintaining reform momentum amid global uncertainty.

Speaking at a media briefing on Thursday, IMF Communications Director Julie Kozack confirmed that the IMF is closely engaged with Sri Lankan authorities to assess key prior actions taken recently, including a 15% increase in electricity tariffs and the publication of revised bulk supply transaction account guidelines. 

These measures announced on 11 June, are considered essential prior actions for the country to unblock the next branch of IMF financing. 

“Once the review is completed by our Executive Board, Sri Lanka would have access to about $ 344 million in financing,” she said, adding that the Board meeting date will be announced in due course.

She highlighted that on 25 April, IMF staff and Sri Lankan authorities reached a staff-level agreement on the fourth review of the country’s Extended Fund Facility (EFF) program. 

Kozak characterised the overall performance as strong and reaffirmed the Government’s commitment to the program’s mission objectives. 

“The program and Sri Lanka’s ambitious reform agenda continue to deliver commendable outcomes. Performance under the program remains strong overall, and the Government remains committed to program objectives,” she added. 

She also acknowledged the publication of Sri Lanka’s updated governance reform action plan at the end of February, which included legislative commitments such as public procurement and asset recovery laws aligned with recommendations from the IMF’s Governance Diagnostic Report.

Commenting on the broader global outlook, Kozack cautioned that heightened global uncertainty, including policy shifts and market volatility, continues to pose risks to Sri Lanka, as it does to many other economies.

“If some of the risks associated with high global uncertainty were to materialise, the way we will approach this will be to work very closely with the authorities first to assess the impact of any downside risk that materialises, and then we will also work with the authorities to consider what are the appropriate policy responses within the contours of the program,” she elaborated. 

Kozack reiterated that sustaining reform momentum, both in macroeconomic policies and in structural growth-oriented reforms is crucial for all IMF member countries, including Sri Lanka.

Responding to a question on President Anura Kumara Disanayake’s recent remarks, she reaffirmed the IMF’s view that Sri Lanka has made ‘commendable progress in navigating its crisis and implementing very difficult, but much-needed reforms.’

“We see a remarkable rebound in growth following Sri Lanka’s crisis. Inflation is low, international reserves are continuing to grow, revenue collection on the fiscal side is improving and the debt restructuring process is nearly complete. So, I think it’s really important to recognise the significant efforts that Sri Lanka has taken and also the tremendous progress that has been made,” she added. 

Kozack asserted that the IMF focuses on ensuring successful completion of the current EFF program. 

“Right now, we are very much focused on the current EFF and therefore, as I mentioned, it’s going to be critical for Sri Lanka to sustain the reform momentum through the remainder of this EFF program,” she stressed. 

The positive stand from the IMF comes ahead of visit by its First Deputy Managing Director (FDMD) Dr. Gita Gopinath to Sri Lanka tomorrow.

This visit is significant, as it marks the first time since 2005 that a serving FDMD of the IMF visits Sri Lanka. 

During the two-day visit, Dr. Gopinath will be the Guest of Honour at the conference on ‘Sri Lanka’s Road to Recovery: Debt and Governance,’ jointly co-hosted by the Ministry of Finance, Central Bank of Sri Lanka and the IMF, on 16 June. 

At the mid-point of the IMF-supported reform program, the conference aims to reflect upon the lessons learnt from Sri Lanka’s experience in restoring macroeconomic stability, implementing debt restructuring and governance reforms, and to focus on the challenges ahead. 

Additionally, FDMD is expected to hold bilateral discussions with the Sri Lankan authorities and several key stakeholders on the IMF’s engagement with Sri Lanka.