IMF approves 4th tranche and lays down new expectations

Colombo (News1st) - The Executive Board of the International Monetary Fund (IMF) announced on Wednesday (June 20th) that they have completed the fourth review of Sri Lanka’s economic performance under the Extended Fund Facility (EFF) arrangement. Completion of the 4th review released the next tranche of the EFF which amounts to around US$ 252 million. The Three year EFF program was approved in June 2016 and grants Sri Lanka a total of US$ 1.5 billion, provided that Sri Lanka continues to adhere to the policies of the IMF. According to Acting Chair and Deputy Managing Director of the IMF, Mitsuhiro Furusawa, Sri lanka has made "important" progress under the EFF. He notes that efforts undertaken by the Government to "improve the policy mix through fiscal consolidation, prudent monetary policy, and landmark structural reforms are supporting the economic recovery, despite recent shocks" Furusawa believes that Sri Lanka must sustain the reform momentum in the country as it is critical to strengthen the country's resilience to shocks given the still sizable public debt and low external buffers. The IMF has hailed the recent approval of an automatic fuel pricing formula as a major achievement towards reducing fiscal risks from state-owned enterprises (SOEs).  It also calls for a similar formula for electricity, a restructuring plan for SriLankan airlines. Deputy Managing Director of the IMF, Mitsuhiro Furusawa further states that "the Central Bank of Sri Lanka should continue to manage monetary policy prudently, in the face of price shocks and market volatility. Efforts to build up international reserves should be sustained, with exchange rate flexibility as the first line of defense in response to volatile global capital flows. Upgrading the central bank law will be instrumental for the new inflation targeting framework."