Two IMF Reviews Possible, But Talks Needed After Major Shock

COLOMBO (News 1st); Governor of the Central Bank of Sri Lanka, Dr. P. Nandalal Weerasinghe, said discussions with the visiting International Monetary Fund (IMF) delegation later this week will focus on responding to the changed external environment and exploring the possibility of completing two programme reviews together.

Responding to questions on whether Sri Lanka could secure approval for two IMF tranches in one go amid recent developments, Dr. Weerasinghe confirmed that this is the stated objective of the upcoming mission.

“Yes, they will be here to discuss the new situation,” he said, noting that the IMF has already announced that the goal of the next mission is to reach a staff-level agreement for the completion of two reviews together.

However, Dr. Weerasinghe stressed that shifting economic conditions would need to be carefully assessed during the discussions. He said changes in the outlook naturally require adjustments to policies and targets under the programme.

“Obviously, when the situation changes, when the outlook is different, then we have to discuss what are the new policies, what are the new targets,” the CBSL Governor said, adding that these issues would be addressed during the IMF mission.

He pointed out that IMF programme reviews have consistently evolved in response to changing circumstances. Referring to the progress so far, Dr. Weerasinghe noted that four reviews have already been completed, and that each review has involved changes to conditions reflecting new developments.

“That will continue to happen,” he said, emphasising that the upcoming review cycle is likely to involve more significant changes than previous ones due to what he described as a major external shock stemming from the Middle East conflict.

He said the impact of this shock would be taken into account during discussions over the coming weeks, including in relation to international net reserve targets and other programme benchmarks.