Though Sri Lanka’s economic outlook remains positive, global trade policy uncertainties pose significant risks to its macroeconomic and social stability, according to the International Monetary Fund (IMF), which recently offered the country immediate access to special drawing rights (SDR) worth 254 million ($350 million) to support economic policies and reforms.
This brings the total IMF financial support disbursed so far to SDR 1.27 billion ($1.74 billion).
The IMF executive board recently completed the fourth review under the 48-month Extended Fund Facility with Sri Lanka.
“Sri Lanka’s performance under the Fund-supported arrangement is generally strong with some implementation risks being addressed. Reforms are bearing fruit, with economic growth strengthening, inflation remaining low, reserves accumulating and fiscal revenues improving. The debt restructuring process is nearing completion,” noted Kenji Okamura, IMF deputy managing director and acting chair, in a statement.
“Sustained revenue mobilisation is critical to restoring fiscal sustainability and creating fiscal space. Strengthening tax exemption frameworks, boosting tax compliance and enhancing public financial management to ensure effective arrears management are important,” he said.
“Further improving the coverage and targeting of social support to the vulnerable is also necessary. A smoother execution of capital spending within the fiscal envelope would help foster medium-term growth,” he added.
