By: Staff Writer
Colombo (LNW): The government will continue to implement our reform agenda in order to support Sri Lanka’s economic recovery and successfully complete the IMF program.
Despite the ambitious fiscal consolidation efforts, Sri Lanka’s public debt trajectory is set to remain unsustainable in the absence of a comprehensive debt treatment,”Finance ministry and Central Bank heads said. .
As per the IMF program, state authorities are fully committed to achieving fiscal consolidation and implementing fiscal structural reforms; restoring public debt sustainability; restoring price stability and rebuilding external buffers; safeguarding financial system stability; and reducing corruption vulnerabilities and further introducing growth-enhancing reforms,” they said.
Global creditors and investors were told that Sri Lankan people are the Government’s priority, and as part of the IMF program, it aims to enhance the existing social safety nets to protect the most vulnerable.
As a result, Sri Lanka’s economy has already shown some encouraging stabilization signs, with year-on-year inflation slowing down and earnings from tourism rebounding to more standard levels.
Sri Lanka day before yesterday held an investor presentation in order to explain the current macro economic situation and outlined the key pillars and objectives of the IMF program as well as the next steps with regard to the engagement with creditors.
Treasury Secretary Mahinda Siriwardena and Central Bank Governor Dr. Nandalal Weerasinghe told the virtual presentation that Sri Lankan Government has embarked on an ambitious reform agenda, and we have successfully achieved all prior actions required to unlock the IMF financing.
It was noted that Sri Lanka is also facing a significant external financing gap over the IMF program period. This financing gap will have to be covered through new external funding and external debt service relief.
The Authorities are also exploring options for a domestic debt optimization (DDO) operation aimed at liquidity relief while preserving financial stability to avoid further erosion of Sri Lanka’s repayment capacity. It is envisaged that this DDO will be conducted on a voluntary basis and be based on our consultations with major T-Bonds holders.
“As we move ahead, we are looking forward to accelerating and intensifying engagement with all our creditors in a transparent way, in good faith, and we are hoping to reach debt treatment agreements that are consistent with the IMF debt sustainability analysis and with the comparability of treatment principle,” Treasury Secretary and CBSL Governor said.
On 20 March 2023, the IMF Board approved Sri Lanka›s IMF program, unlocking up to $7 billion in funding from the IMF and other IFIs.
The IMF program provides a clear roadmap in terms of policy implementation and will stabilize the economy of Sri Lanka and allow the country to regain its growth potential and address its economic vulnerabilities.