Reforms have progressed but vulnerabilities remain: IMF Staff Mission

Mar 11, 2018 (LBO) – Despite weather-related shocks and some delays in implementation, program performance remains broadly on track, said IMF Staff Mission after a recent visit to Sri Lanka.

The IMF staff team led by Manuela Goretti visited Colombo from February 27 – March 9 to hold discussions for the fourth review of Sri Lankan authorities’ economic reform program under the three-year Extended Fund Facility.

The mission projected the real GDP growth to rise to 4.4 percent in 2018, supported by a recovery in agriculture and industry and robust growth in services, reaching 5 percent over the medium term.

They also projected the inflation to revert to around 5 percent by end-2018, as food prices stabilize.

The mission, however, said the economy remains vulnerable to adverse shocks given the still sizable public debt and low external buffers.

“Looking ahead, to support inclusive, sustained growth, the reform momentum needs to continue and policy frameworks and institutions further strengthened,” the IMF said.

“Against this backdrop, the authorities should push ahead with their Vision 2025 strategy to support Sri Lanka’s rapid and inclusive growth through ambitious structural, macro-economic, and social reforms.”

Key priorities include: (i) advancing fiscal consolidation through revenue mobilization, a more robust fiscal rule, and stronger SOE governance, (ii) modernizing monetary, financial and exchange rate policy frameworks, and (iii) accelerating growth-enhancing structural reforms.

IMF Staff Concludes the 2018 Article IV Mission with Sri Lanka and Discusses Progress of Economic Reform Program