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IMF reaches staff-level agreement on first review of Sri Lanka’s Extended Fund Facility arrangement

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IMF staff and the Sri Lankan authorities have reached a staff-level agreement on economic policies to conclude the first review of the 48-month EFF-supported programme. Sri Lanka will have access to SDR 254 million (about 330 million U.S Dollars) in financing once the review is approved by the IMF Management and IMF Executive Board.

Macroeconomic policy reforms are starting to bear fruit and the economy is showing tentative signs of stabilization. Sustaining the reform momentum and addressing governance weaknesses and corruption vulnerabilities are critical to put the economy on a path towards lasting recovery and stable and inclusive growth.

Completion of the review by the IMF’s Executive Board requires: (i) the implementation by the authorities of all prior actions; and (ii) the completion of financing assurances reviews.

After constructive discussions with the authorities in Colombo and during the Annual Meetings in Marrakech, Morocco, IMF Senior Mission Chief for Sri Lanka, Peter Breuer, and Deputy Mission Chief, Katsiaryna Svirydzenka, issued the following statement:

“The IMF team reached a staff-level agreement with the Sri Lankan authorities on the first review under an economic reform programme supported by a 48-month Extended Fund Facility (EFF) arrangement . The arrangement was approved by the IMF Executive Board for a total amount of SDR 2.3 billion (about US$3 billion) on March 20, 2023.

“The staff-level agreement is subject to the approval by IMF management and the IMF Executive Board in the period ahead, contingent on: (i) the implementation by the authorities of all prior actions; (ii) the completion of financing assurances reviews, which will include confirming whether adequate progress has been made with debt restructuring to give confidence that the restructuring will be concluded in a timely manner and in line with the programme’s debt targets.

“Upon approval by the IMF Executive Board, Sri Lanka would have access to SDR 254 million (about US$330 million), bringing the total IMF financial support disbursed under the arrangement to SDR 508 million (about US$660 million).

“The authorities remain committed to the ambitious reform agenda under the EFF and their reform efforts have been commendable, including rapid disinflation and a significant fiscal adjustment expected by the end of this year. Program performance at end-June was satisfactory, with all quantitative performance criteria for end-June met, except the one on expenditure arrears. All indicative targets were also met except the one on tax revenues. Most structural benchmarks were either met or implemented with delay by end-September 2023. Notably, the authorities published on time the Governance Diagnostic Report. Sri Lanka is the first country in Asia that has undergone the IMF Governance Diagnostic exercise. Progress is still ongoing on the revenue measures to support the fiscal consolidation during 2024 in line with programme parameters.

“The economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to 1.3 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite these early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP in the second quarter contracting by 3.1 percent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Sri Lanka’s external position has weakened as a result of prolonged debt restructuring discussions, and reserve accumulation has slowed in recent months. Agreeing on debt treatments consistent with restoring debt sustainability quickly will be key to resolving uncertainty that is constraining Sri Lankan businesses and external financing.

“Sustaining the reform momentum is of paramount importance in steering the economy towards a sustained recovery and fostering stable, inclusive economic growth. We welcome the authorities’ commitment to increase revenues and signal better governance by adopting needed tax measures, strengthening tax administration, and actively eliminating tax evasion.

Maintaining cost recovery in fuel and electricity pricing helps mitigate fiscal risks arising from state-owned enterprises. Further strengthening the social safety net remains critical to protect the poor and the vulnerable. While inflation has decelerated faster than expected, continued monitoring is warranted to help anchor inflationary expectations and support macroeconomic stability. Against continued external uncertainty, it remains important to rebuild external buffers through strong reserves accumulation.

“Following the authorities’ domestic debt operation, the critical next step is to secure an agreement with official creditors on a debt treatment consistent with the IMF Executive Board-approved program parameters and debt targets. We have taken note of a tentative agreement between Sri Lanka and the Export-Import Bank of China and look forward to analyzing the details when we receive them.

We urge all official creditors to move forward and agree on an appropriate debt treatment in line with the financing assurances they provided. We understand negotiations between commercial creditors and Sri Lanka are ongoing and emphasize the need to restore debt sustainability in a robust manner. Delays risk worsening the economic outlook for Sri Lanka, widening its financing gaps, hindering its return to sustainable growth, and thereby reducing its capacity to repay.

“The authorities’ commitment to implement key recommendations of the recently published Governance Diagnostic Report is a welcome step. Concrete steps towards addressing corruption risks and strengthening accountability will be essential for rebuilding economic confidence and making growth more robust and inclusive.

“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank Governor Dr. P. Nandalal Weerasinghe, State Minister Shehan Semasinghe, Secretary to the Treasury K.M. Mahinda Siriwardana, and other senior government and CB officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners”.



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Israel resumes attacks as Iran vows to avenge supreme leader’s death

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An explosion caused by an Iranian missile in Tel Aviv

* Iran begins 40-day mourning after Khamenei killed in US-Israeli attack

* President Pezeshkian condemns killing as ‘a great crime’

Iran has begun 40 days of mourning after Supreme Leader Ayatollah Ali Khamenei was killed in ongoing attacks by the United States and Israel, according to Iranian state media.

Top security officials were also killed in Saturday’s strikes, along with Khamenei’s daughter, son-in-law and grandson. The killings mark one of the most significant blows to Iran’s leadership since the 1979 Islamic revolution Al Jazeera has reported.

Iranian President Masoud Pezeshkian condemned the killing as “a great crime”, according to a statement from his office. He also declared seven days of public holidays in addition to the 40-day mourning period.

Reporting from Tehran, Al Jazeera’s Tohid Asadi said people were pouring into the streets of the capital following the news of Khamenei’s killing.

“There will be expected ceremonies,” he said, noting they would likely take place amid continuing bombardment across the country.

Protests denouncing Khamenei’s killing were also reported elsewhere, including Shiraz, Yasuj and Lorestan.

“There will be expected ceremonies,” he said, noting they would likely take place amid continuing bombardment across the country.

Footage aired by Iranian state media showed supporters mourning at the shrine of Imam Reza in Mashhad, with several people seen crying and collapsing in grief, according to Al Jazeera.

The killing also led to protests in neighbouring Iraq, which declared three days of public mourning. In Baghdad, protesters confronted security forces in the heavily fortified Green Zone, which houses Iraqi government buildings and foreign embassies.

Videos verified by Al Jazeera showed demonstrators waving flags and shouting slogans, with witnesses saying some were attempting to mobilise towards the US Embassy. Footage also showed protesters blocking vehicles at a roundabout near one of the entrances to the area.

There was also a protest in the Pakistani city of Karachi, where footage, verified by Al Jazeera, showed people setting fire to and smashing the windows of the US consulate.

However, there have also been reports of celebrations in Iran, with the Reuters news agency quoting witnesses as saying some people had taken to the streets in Tehran, the nearby city of Karaj and the central city of Isfahan.

Meanwhile, the official IRNA news agency reported that a three-person council, consisting of the country’s president, the chief of the judiciary, and one of the jurists of the Guardian Council, will temporarily assume all leadership duties in the country. The body will temporarily oversee the country until a new supreme leader is elected.

Ali Larijani, the head of Iran’s Supreme National Security Council, accused the US and Israel of trying to plunder Iran, in an interview aired on state TV.

He also called on Iranians to unite. “Groups seeking to divide Iran should know that we will not tolerate it,” he added.

Smoke rises over central Tehran following ongoing U.S.–Israeli strikes on Iran yesterday.[EPA]

Khamenei assumed leadership of Iran in 1989 following the death of Ayatollah Ruhollah Khomeini, who had led the Islamic revolution a decade earlier.

While Khomeini was regarded as the ideological force behind the revolution that ended the Pahlavi monarchy, Khamenei went on to shape Iran’s military and paramilitary apparatus, strengthening both its domestic control and its regional influence.

Meanwhile, the Islamic Revolutionary Guard Corps (IRGC) pledged revenge and said it had launched strikes on 27 bases hosting US troops in the region, as well as Israeli military facilities in Tel Aviv.

Explosions have continued to be reported in Qatar and the United Arab Emirates, while security alerts are in place in several countries across the region.

US President Donald Trump, in a social media post on Sunday, warned Iran that it would be hit “with a force that has ?never been seen before” if it retaliated.

Iran’s retaliatory attacks since Saturday have targeted Israel and US assets across multiple Middle East countries, including Qatar, the UAE, Kuwait, Bahrain, Jordan, Saudi Arabia and Iraq.

Harlan Ullman, chairman of the strategic advisory firm Killowen Group and an adviser to the Atlantic Council in Washington, DC, said the US may have made a “big mistake” by killing Khamenei.

“Decapitation only works when you get all the leaders, and I don’t think that we got all the leaders,” Ullman said, adding that the US should not expect Iran’s leadership to enter negotiations in the immediate aftermath.

Iranian state media reported on Saturday at least 201 people have been killed in the joint US-Israeli attacks across 24 provinces, citing the Red Crescent. In southern Iran, at least 148 people were killed and 95 wounded in a strike on an elementary girls’ school in Minab on Saturday, with the toll continuing to rise, according to state media.

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CPC has enough fuel stocks

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There would be no delay in fuel shipments scheduled for April and May, the Ceylon Petroleum Corporation (CPC) assured yesterday.

Addressing a media briefing in Colombo, CPC Chairman D.J. Rajakaruna said Sri Lanka’s fuel supplies did not originate from the present conflict zone in West Asia and, therefore, supplies to the Corporation would not be disrupted.

He noted that the relevant consignments were due to arrive from India and Singapore as planned.

“We are making this statement responsibly. There is no need for the public to queue up for fuel. Distribution was not originally scheduled for Sunday (01), but due to increased demand, we have deployed all distribution staff to continue fuel issuance. Although Monday (02) is a Poya Day, fuel supplies will continue without interruption,” he said.

The Chairman added that all filling stations had been instructed not to dispense fuel into cans or barrels, warning that legal action would be taken against those attempting to purchase fuel in bulk containers for resale.

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Lanka, Pakistan strengthen ties at 13th JEC

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Wasantha Samarasinghe, Minister of Trade, Commerce, Food Security and Cooperative Development and Haroon Akhtar Khan, Special Assistant to the Prime Minister of Pakistan for Industries and Production at the 13th Session of the Sri Lanka–Pakistan Joint Economic Commission in Colombo.

The 13th Session of the Sri Lanka–Pakistan Joint Economic Commission (JEC) was successfully held recently in Colombo, reinforcing the strong and longstanding economic and diplomatic ties between the two countries.

The Sri Lankan delegation was led by Wasantha Samarasinghe, Minister of Trade, Commerce, Food Security and Cooperative Development, while the Pakistani delegation was headed by Haroon Akhtar Khan, Special Assistant to the Prime Minister of Pakistan for Industries and Production. The session concluded with the signing of the Agreed Minutes by both Co-Chairs, formalising cooperation across multiple sectors.

The Pakistan High Commission in Colombo said that in the IT and digital economy, both sides agreed in principle to establish a Joint Working Group on IT and telecommunications, promote collaboration in emerging technologies, and support each other in international digital forums.

Industrial cooperation was a key focus, with discussions on expanding trade in chemicals, polymers, engineering goods, glassware, surgical instruments, and pharmaceuticals. Sri Lanka invited Pakistani pharmaceutical companies to explore investment opportunities in designated pharmaceutical zones. Both countries also agreed to strengthen collaboration in Export Processing Zones and enhance support for small and medium enterprises through their respective development agencies.

Significant progress was made in agriculture and livestock, including cooperation on meat exports, livestock farming, seed certification, sanitary and phytosanitary harmonisation, pest risk analysis, and capacity building. Procedures for the export of Sri Lankan pineapples and avocados to Pakistan were advanced. Both sides explored electronic phytosanitary certification (ePhyto), blockchain-based seed traceability systems, and increased trade in agro-commodities such as rice, sesame, and onions.

In education, the JEC emphasised academic and research cooperation, faculty and student exchanges, accreditation and quality assurance, and promoting Pakistan as a higher education destination for Sri Lankan students. A Joint Working Group on Education and Science was proposed, alongside renewal of several institutional Memoranda of Understanding.

Cooperation in science, technology, and innovation will continue under existing bilateral frameworks, with plans for joint research in advanced materials, biotechnology, climate change mitigation, and emerging technologies. Collaborative research projects, student exchanges, and co-authored publications were highlighted as key initiatives.

Health sector collaboration will focus on joint research, academic exchanges, regulatory cooperation on therapeutic goods, capacity building, fast-track registration of essential medicines, public-private partnerships, epidemiological surveillance, and coordinated responses to disease outbreaks.

Maritime cooperation was also discussed, with Pakistan offering technical expertise, training, and industrial collaboration through its shipbuilding institutions. Both sides explored enhanced maritime connectivity, including transshipment, port cooperation at Karachi and Gwadar, direct shipping routes, logistics integration, and maritime training programs.

Commerce secretary-level talks reviewed the progress of the Pakistan–Sri Lanka Free Trade Agreement (PSFTA), assessing current implementation and identifying measures to further enhance bilateral trade and economic cooperation.

On the sidelines, Special Assistant Haroon Akhtar Khan held discussions with Sri Lankan Cabinet members on collaboration in industry, labor and foreign employment, and health sectors.

Both delegations expressed satisfaction with the outcomes of the 13th JEC and reaffirmed their commitment to regular engagement and effective implementation of agreed initiatives. It was mutually agreed that the 14th session will be held in Islamabad, with dates to be confirmed through diplomatic channels.

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