By:Staff WriterColombo (LNW): Since the commencement of negotiations for the IMF-EFF arrangement in early 2022, Sri Lanka has completed nine prior actions by March 2023 and has formulated a mechanism for meeting the structural benchmarks.
The completion of these prior actions was instrumental in paving the way for broader reforms to be implemented in the next four years under the EFF.
The prior actions that have been already completed by Sri Lanka include, obtaining Cabinet approval for revenue measures to support fiscal consolidation during 2023 in line with programme parameters.
The there obligations were the , obtaining Parliamentary approval for a revised 2022 budget, submission of the 2023 Appropriation Bill to the Parliament, obtaining Cabinet approval to automate monthly retail fuel price adjustment,to automate semi-annual cost-recovery based electricity price adjustment, Cabinet approval of the new Central Bank Ac.
Cabinet approval for the amendments to the Banking Act, strengthening key elements of the Central Bank’s crisis management powers hiring an independent firm to conduct banking sector diagnostic exercise, and increasing policy interest rates by 100 basis points to ensure forward looking real policy interest rates are on a firm upward path.
In addition to the above, three important upfront measures were also implemented which include Parliamentary approval of the 2023 budget that was in line with programme parameters, Parliamentary approval of necessary legislative revisions to implement the 2023 revenue measures, and updating the Emergency Liquidity Assistance framework for banks.
Further, Sri Lanka is required to implement several structural benchmarks related to fiscal matters, State Owned Enterprises (SOEs), social safety net reforms,and monetary and exchange rate policies and reforms related to fiscal sector and governance in the period ahead.
The programme is expected to trigger additional financing assistance with budget support from the World Bank and the Asian Development Bank of US dollars 3.75 billion, of which US dollars 900 million is expected in 2023.
It is also expected that with the recovery in the economy and buildup of buffers,Sri Lanka would be able to access international markets to raise funds in terms of sovereign bond issues in 2027.
These resources, together with external public debt service relief, will close the external financing gap and allow Sri Lanka to rebuild its gross international reserves.