Sri Lanka advances economic reforms as IMF review approaches

Sri Lanka is making notable progress in its economic reforms, setting the stage for an upcoming third review of the Extended Fund Facility (EFF) program with the International Monetary Fund (IMF), according to a senior IMF official.

Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, shared this positive outlook during a press briefing at the IMF-World Bank Annual Meetings in Washington.

Srinivasan highlighted the productive discussions held with the new Sri Lankan government, which took office recently. He noted that there is a “unanimous consensus” on the significant strides the country has made since facing severe economic challenges in 2022.

“Sri Lanka has come a long way in terms of undertaking reforms that have led to some hard-won gains,” he stated, pointing out that the nation has experienced positive growth for four consecutive quarters and declining inflation rates.

The IMF is encouraged by the government’s commitment to safeguard and build upon these achievements as part of the EFF program, which addresses key priorities including social protection.

While details of the program are still being finalized during the meetings in Washington, Srinivasan expressed hope for a swift move toward the third review.

On the topic of Sri Lanka’s debt restructuring, Srinivasan reported that the government has made progress, having reached agreements with official creditors and an agreement in principle with private creditors.

The next crucial step is to formalize agreements with all creditors, a process that Srinivasan emphasized is essential for continued reform and recovery.

He also discussed the role of macro-linked bonds in debt restructuring, stating that while these instruments have gained popularity, the specifics of their negotiation depend on individual countries and their creditor relationships.

“What we are concerned about is whether these instruments are consistent with our program targets on debt,” he added.

Overall, Sri Lanka’s economic recovery efforts, marked by ongoing reforms and debt negotiations, are paving the way for a more sustainable future, as the country moves closer to achieving its economic goals.