Colombo, Sep 27 (EFE).- The International Monetary Fund (IMF) said on Wednesday that discussions will continue to secure a staff-level agreement as Sri Lanka was unlikely to meet revenue targets after a $3 billion bailout package.
An IMF team arrived in Colombo for the first review of the progress made under the agreement and release additional funds from the package, which was approved in March this year to address the island’s severe economic crisis.
Under the agreement, Sri Lanka initially received $330 million, committing to ambitious fiscal consolidation, the restoration of public debt sustainability, and other structural reforms.
The country is now awaiting the disbursement of the second tranche of funds.
However, the IMF delegation led by Peter Breuer, which was in Sri Lanka from Sep. 14 to 27 to support the approval of the first program review, has indicated that the disbursement will have to wait.
“Discussions will continue towards reaching a staff-level agreement in the near term that will maintain the reform momentum needed to allow Sri Lanka to emerge from its deep economic crisis,” an IMF statement said.
The statement said Sri Lankan authorities had met the program’s primary balance targets and remained committed to support debt sustainability efforts.
“However, revenue mobilization gains—while improved relative to last year—are expected to fall short of initial projections by nearly 15 percent by year end,” the statement said.
The statement emphasized the importance of strengthening tax administration, removing tax exemptions, and actively combating tax evasion.
Despite early signs of stabilization, the statement cautioned that full economic recovery “is not yet assured,” as growth momentum remains subdued.
The IMF commended the resilience of the Sri Lankans in the face of enormous challenges, stating that “efforts are bearing fruit as the economy is showing tentative signs of stabilization.”
Among the achievements highlighted in the statement were a significant reduction in inflation from a peak of 70 percent in September 2022 to below 2 percent in September 2023, an increase of $1.5 billion in gross international reserves from March to June this year, and an easing of shortages of essential goods.
Sri Lanka experienced its worst economic crisis in decades last year, with inflation levels exceeding 80 percent. However, the situation has improved since the IMF’s bailout.
“We are observing an uptick in sales. People are buying more vegetables now. At any time, our vegetable shop is crowded with consumers,” Pradeep Perera, who works at a vegetable stall in Colombo, told Efe.
The country’s tourism industry, one of the top three major foreign income generators, is gradually rebounding.
“We are quite confident we’ll be able to surpass one and a half million (tourists’ arrivals),” Priantha Fernando, who heads the Sri Lanka Tourism Development Authority (SLTDA) told Efe. EFE