Sri Lanka and the International Monetary Fund (IMF) have reached an agreement to prepare and sign a Staff Level Agreement (SLA) after the return of President Ranil Wickremesinghe to the country. This pivotal decision was reached during the first meeting of the second round of talks with the IMF. The discussion took place at the President’s office on Thursday, with Chief of Staff Sagala Ratnayake, representing President Wickremesinghe.
During the meeting, representatives from the IMF expressed their contentment with the progress by Sri Lanka while also highlighting certain areas that have been progressing at a slow pace.
One key concern raised by the IMF representatives was the failure to meet the goal of increasing Government revenue. In response, Ratnayake emphasised the Government’s commitment to take full responsibility for the program and called upon the parties to collaborate with a clear understanding of their roles.
Ratnayake also stressed the importance of setting practical targets and adopting a more practical approach to tax collection. He cited the example of increased taxes on alcohol, which led to a decrease in sales and a surge in illegal alcohol production. He attributed the decline in income to import restrictions, which are being phased out, and said that investments must increase to boost Government revenue.
The IMF team said that due to Sri Lanka’s past failure to adhere to IMF agreements, stricter conditions had to be imposed this time. Discussions then focused on preparing the SLA for the second installment of US$ 330 million, with an acknowledgment that this agreement would also facilitate the restructuring of international debt with the participation of primary lenders such as India, Japan, the Paris Club and China.
Minister of State for Finance Shehan Semasinghe, President’s Secretary Saman Ekanayake, and senior representatives of the IMF also participated in the discussion.
The agreement marks a crucial step in Sri Lanka’s economic roadmap and sets the stage for continued collaboration with the IMF to address fiscal challenges and enhance economic stability. The signing of the SLA awaits the return of President Wickremesinghe to the country. The IMF review team will remain in Sri Lanka until September 27, according to officials.
The IMF has agreed in principle to disburse US$ 2.9 to Sri Lanka through an Extended Fund Facility (EFF) to overcome the economic crisis.