COLOMBO (NewsRadio); Sri Lanka and the International Monetary Fund are scheduled to sign a staff level agreement as part of the Extended Fund Facility arrangement in the next few days.
A spokesperson of the President’s Office informed NewsRadio that both parties have to agree on certain specifics before signing the agreement.
Although the agreement was due to be signed today, it is expected to be completed in the next few days.
Meanwhile, earlier to was reported that Sri Lanka has met most of the requirements ahead of the first review of the International Monetary Fund’s Extended Fund Facility arrangement.
President Ranil Wickremesinghe and the IMF team led by Senior Mission Chief for Sri Lanka Peter Breuer held discussions yesterday to finalize the staff level agreement.
President Wickremesinghe held discussions with the officials, as part of the review of the IMF programme.
Following discussions with President Wickremesinghe, the staff level agreement was to be finalized which will facilitate the disbursement of around USD 330 million as part of the Extended Fund Facility programme.
The IMF team which arrived in Sri Lanka on the 14th of this month has been holding discussions with officials of the Ministry of Finance, the Central Bank of Sri Lanka and several other factions pertaining to the EFF arrangement and the IMF programme approved in March.
Accordingly, the final round of discussions was held with the President yesterday in Colombo.
According to a senior official who was part of the discussions, with the completion of the domestic debt restructuring, Sri Lanka has met most of the requirements required to fulfill the first IMF review.
However, the IMF team had raised concerns about the government’s inability to increase the state revenue. Increasing the revenue of the state has been a contentious topic ever since the discussions pertaining to the IMF programme commenced.
Trade unions and professionals have been opposing the move by the government to widen the tax bracket while the proposed improvements in tax collection methods have not materialized to a satisfactory level.
Speaking to media last week, State Minister of Finance Ranjith Siyambalapitiya also acknowledged the lack of progress in increasing the tax revenue of the state.
According to the State Minister of Finance, the target of the government was to increase revenue to 11.3 per cent of gross domestic product in 2023 from 8.3 per cent last year while the shortfall could be around Rs. 100 billion.
Meanwhile, the IMF team had acknowledged the progress made by Sri Lanka in terms of reforms and achieving other targets while also indicating some areas must be improved at a faster rate including measures to increase the revenue of the government.
At the commencement of the talks, the IMF team had indicated that since Sri Lanka had failed to meet certain targets of previous IMF agreements, stricter conditions had to be imposed this time.
In March this year, the IMF Executive Board approved a 48-month extended arrangement under the Extended Fund Facility of SDR 2.286 billion (about USD 3 billion) to support Sri Lanka’s economic policies and reforms.
The objectives of the EFF-supported program are to restore macroeconomic stability and debt sustainability, safeguarding financial stability, and stepping up structural reforms to unlock Sri Lanka’s growth potential.
The Executive Board’s decision enabled an immediate disbursement equivalent to SDR 254 million (about USD 333 million) in March.
Following the first review after considering the programme’s performance until end-June, it will be presented to the IMF Executive Board.
If it is approved by both the staff and the Executive Board, it will result in another disbursement.
Sri Lanka is expected to receive around USD 330 million at the completion of the process.