On September 13, 2024, Julie Kozack, the Director of the Communications Department at the International Monetary Fund (IMF), provided an update on Sri Lanka’s economic program and the next steps following the Presidential elections(IMF further discussions). Here’s a detailed look at the IMF’s latest statements and what they mean for Sri Lanka’s economic future.
Key Points from the IMF Briefing
- Timing of the Next Review The IMF’s next program review is scheduled for mid-October 2024. However, as Julie Kozack noted, further discussions will only resume once the results of the Presidential elections are clear and a new government is in place. This approach is crucial as the outcome of the elections will significantly impact the direction of Sri Lanka’s economic policies and reforms. “The timing of the third review will be discussed with the Government following the elections,” Kozack stated during a media briefing. The IMF aims to align its program discussions with the new administration’s priorities and strategies.
- Current Economic Progress According to the IMF, Sri Lanka’s economic program has seen significant achievements. The country has made progress in several key areas:
- Economic Growth: The economy is beginning to recover with signs of revival.
- Inflation: Inflation rates are decreasing, providing some relief to consumers.
- International Reserves: Reserves are on the rise, which is a positive indicator of economic stability.
- Revenue Mobilization: Efforts to enhance revenue collection are showing improvements. Despite these positive developments, Kozack emphasized that Sri Lanka is not yet out of the crisis. “The country is not out of the woods yet,” she said, underscoring the importance of continuing to safeguard the hard-won gains from the reforms.
- Debt Sustainability Assessment (DSA) There have been speculations about revisiting the Debt Sustainability Assessment (DSA). Kozack addressed these concerns by clarifying that discussions on the DSA would be conducted after the elections. The IMF remains prepared to move forward with discussions based on the new government’s approach and priorities. “We will move forward with program discussions after the Presidential Elections take place and a new Government, or the outcome based on the choice of the people,” Kozack explained. This ensures that the DSA and related policies will be aligned with the new administration’s plans.
- Reform Efforts and Challenges The IMF’s statement highlights that while the reform efforts in Sri Lanka are bearing fruit, the country must continue its focus on maintaining momentum. Key areas of reform, especially in debt restructuring, remain crucial. The IMF stresses that achieving the program’s objectives is vital for Sri Lanka to fully emerge from its current economic challenges. “Achieving the program’s objectives is a key priority to give Sri Lanka a chance to emerge from one of its worst crises in history,” Kozack noted. This involves not only implementing reforms but also addressing ongoing vulnerabilities and challenges.
- Role of the IMF The IMF’s role in Sri Lanka remains primarily financial and advisory. The IMF is focused on supporting Sri Lanka through financial assistance and providing advice on economic policies. Key milestones include the execution of domestic debt restructuring and finalizing agreements with official creditors and China EXIM Bank. “The execution of the domestic debt restructuring and finalizing the agreement with the official creditor committee and China EXIM Bank are major milestones,” Kozack said. The IMF staff has assessed the joint working framework and shared this assessment with Sri Lankan authorities and financial advisors for the country’s bondholders.
- Future Plans and Commitments Looking ahead, the IMF and Sri Lanka’s new government will need to collaborate closely to ensure that the economic program remains on track. The focus will be on continuing reform efforts, addressing economic vulnerabilities, and working towards long-term economic stability. The IMF’s commitment to supporting Sri Lanka through this period of transition is clear. By resuming discussions post-elections, the IMF aims to align its support with the new government’s policies and strategies, ensuring that the economic program can adapt to any changes in direction.
Conclusion
The IMF’s update provides a clear picture of the current state of Sri Lanka’s economic program and the next steps in the process. With the upcoming Presidential elections playing a crucial role in shaping the future of the country’s economic policies, the IMF’s approach to resume discussions post-elections is both strategic and necessary.
The progress made so far in areas such as economic growth, inflation control, and revenue mobilization is promising, but the journey towards complete economic recovery is ongoing. The emphasis on safeguarding reform gains and continuing momentum in debt restructuring reflects the IMF’s focus on long-term stability.
As Sri Lanka prepares for a new government, the resumption of discussions with the IMF will be an important step in navigating the country’s economic challenges and opportunities.
