IMF says end-June fiscal target missed by a large margin; earlier targets no longer within reach

Sep 25, 2019 (LBO) – The International Monetary Fund (IMF) says that the protracted impact of the 2018 political crisis and the Easter attacks are significantly impacting the fiscal performance of Sri Lanka.

According to the IMF, the end-June fiscal target was missed by a large margin, due to frontloading of spending from the clearing of arrears and externally-financed capital projects carried over from 2018 as well as a sharp fall in indirect revenues following the terrorist attacks.

“While the program targets agreed at the time of the fifth review are no longer within reach, the authorities are committed to achieve a primary fiscal surplus of 0.2 percent of GDP in 2019, through implementation of remaining revenue measures in the 2019 budget and prudent expenditure management,”

“We welcome the authorities’ commitment to fiscal discipline and institutional reforms to anchor debt sustainability, while providing space to support the ongoing recovery and social goals.”

The IMF said the new Central Bank Act will be a landmark reform in the roadmap towards flexible inflation targeting, strengthening the Central Bank of Sri Lanka’s mandate, governance, accountability, and transparency, in line with international best practice.

Trade and investment liberalization, SOE reforms, and stepped-up anti-corruption efforts will be important to bolster Sri Lanka’s competitiveness and medium-term growth.

The IMF expressed these views after a staff mission to the country for the sixth review of Sri Lanka’s Extended Fund Facility (EFF).

Related: IMF reaches staff-level agreement on sixth review of Sri Lanka’s Extended Fund Facility