Sri Lanka’s  Economic Performance Fragile

Sri Lanka’s Economic Performance Fragile

The International Monetary Fund (IMF) has approved the first review of its Extended Fund Facility (EFF) program with Sri Lanka. This means that the IMF is satisfied with the progress that Sri Lanka has made on its economic reform program. The IMF has also agreed to release the second tranche of its $3.3 billion EFF loan.

Dr Shantha Devarajan, Professor of the Practice of International Development, Edmund A. Walsh School of Foreign Service, Georgetown University, Washington, D.C., and an advisor to the government, answered questions relating to the IMF and related matters and said, “The IMF Board’s approval will also enable the World Bank and Asian Development Bank to disburse their budget-support operations, which could amount to about $800 million.

Sri Lanka’s economic performance has improved this year, but it remains fragile. Inflation has come down from 70% in September 2022 to 2% in September 2023, but economic growth is still negative. The IMF expects growth to turn positive in 2024.
Tax Revenues:

The IMF has encouraged Sri Lanka to increase its tax revenues, including by introducing a property tax. The IMF also believes that Sri Lanka should continue to liberalize its exchange controls.

The IMF is concerned about the pervasive corruption in Sri Lanka. The IMF believes that strengthening governance is essential for reviving the Sri Lankan economy.

The IMF believes that there is a chance of recovering stolen assets from Sri Lanka. The IMF is ready to work with the World Bank and the United Nations to restart a Stolen Asset Recovery Program (STAR) in Sri Lanka

Dr Shantha Devarajan said, ” The World Bank and the United Nations had initiated a Stolen Asset Recovery Programme (STARs) during the Yahapalanaya government, but it was stalled after the 2019 elections.  President Wickremesinghe said in his throne speech (policy statement) early this year that his government was committed to restarting the programme.  The World Bank and the UN are ready to resume the effort as soon as they receive an official request from the government.

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