International Monetary Fund Approved US$ 1.5 Billion to Sri Lanka’s Economic Reforms

The International Monetary Fund has approved the US$ 1.5 billion Extended Arrangement with Sri Lanka to support the economic reform agenda.

The Executive Board of the IMF approved the 36-month extended arrangement with Sri Lanka under the Extended Fund Facility.

The IMF arrangement aims to meet balance of payments needs arising from a deteriorating external environment and pressures that may persist until macroeconomic policies can be adjusted.

It is also expected to catalyse an additional US$ 650 million in other multilateral and bilateral loans, bringing total support to about US$ 2.2 billion.

The Executive Board’s decision will enable an immediate disbursement of about US$ 168.1 million, and the remainder will be available in 6 instalments subject to quarterly reviews.

Deputy Managing Director and Acting Chair Min Zhu following the Executive Board discussion in a statement said despite positive growth momentum, Sri Lanka’s economy is beginning to show signs of strain from an increasingly difficult external environment and challenging policy adjustments.

He said the new government’s economic agenda, supported by the Extended Fund Facility, provides an important opportunity to re-set macroeconomic policies, address key vulnerabilities, boost reserves, and support stability and resilience.

Zhu said rebuilding tax revenues through a comprehensive reform of both tax policy and administration will be key in this regard, supplemented by steps toward more effective control over expenditures and putting state enterprise operations on a more commercial footing.

The Deputy Managing Director and Acting Chair added the economic program also supports the government’s objective of boosting competitiveness and greater integration with regional and global markets through comprehensive trade reform and improvements to the investment environment