The protracted impact of the 2018 political crisis and the Easter attacks are significantly impacting fiscal performance, the IMF claimed.
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.
The team reached understandings at the staff level with the Sri Lankan authorities on the sixth review of the EFF-supported program.
The team praised the authorities’ efforts to normalize the security situation in the country after the tragic terrorist attacks in April and mitigate the impact of the shock on the economy.
The new Central Bank Act will be a landmark reform in the roadmap towards flexible inflation targeting by strengthening the CBSL’s mandate, governance, accountability, and transparency, in line with international best practice, the IMF said.
The mission welcomed the authorities’ commitment to advance revenue-based fiscal consolidation in 2020 and over the medium term to preserve the gains achieved under the program.
It has put the high public debt on a downward path, and provide space for better-targeted social and capital spending.