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IMF Executive Board Concludes 2024 Article IV Consultation with Sri Lanka and Completes the Second Review Under the Extended Fund Facility

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The Executive Board of the International Monetary Fund (IMF) completed the second review under the 48-month Extended Fund Facility (EFF) Arrangement, allowing the authorities to draw SDR 254 million (about US$336 million). This brings the total IMF financial support disbursed so far to SDR 762 million (about US$1 billion). The Executive Board also concluded the 2024 Article IV Consultation with Sri Lanka.

The EFF arrangement for Sri Lanka was approved by the Executive Board on March 20, 2023 (see Press Release No. 23/79) in an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion. The first review of the EFF was completed by the Executive Board on December 12, 2023 with disbursements of SDR 254 million (about US$337 million; see Press Release No. 23/439).

The EFF-supported program aims to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, rebuild external buffers, safeguard financial sector stability, and strengthen governance and growth potential.

Signs of economic recovery are emerging. Real GDP expanded by 3 percent (y-o-y) in the second half of 2023. May 2024 inflation was 0.9 percent and gross international reserves increased to US$5.5 billion by end-April 2024. The primary balance improved to a surplus with tax revenue increasing to 9.8 percent of GDP in 2023. Despite improvements in non‑performing loans, pockets of vulnerabilities remain in the banking sector.

The recovery remains gradual, and the medium-term growth potential hinges on appropriate policy settings. Growth is projected to recover moderately in 2024-25 given constrained bank credit and fiscal consolidation, while facing uncertainties around the debt restructuring and policy direction following the elections. Inflation is expected to temporarily increase due to one-off factors. The current account is expected to remain positive in 2024, driven by improved tourist arrivals and remittances. Domestic risks could arise from waning reform momentum, especially on revenue mobilization. External risks are associated with intensified regional conflicts, commodity price volatility, and a global slowdown. Slow progress in debt restructuring could widen financing gaps.

Following the Executive Board’s discussion,  Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:

“Sri Lanka’s performance under its Fund-supported program remains strong. All quantitative targets were met, except for the marginal shortfall of indicative target on social spending. Most structural benchmarks were either met or implemented with delay. Reforms and policy adjustment are bearing fruit. The economy is starting to recover, inflation remains low, revenue collection is improving, and reserves continue to accumulate. Despite these positive developments, the economy is still vulnerable and the path to debt sustainability remains knife-edged. Important vulnerabilities associated with the ongoing debt restructuring, revenue mobilization, reserve accumulation, and banks’ ability to support the recovery continue to cloud the outlook. Strong reform efforts, adequate safeguards, and contingency planning help mitigate these risks.

“To restore fiscal sustainability, sustained revenue mobilization efforts, promptly finalizing the debt restructuring in line with program targets, and protecting social and capital spending remain critical. Advancing public financial management will help enhance fiscal discipline, and strengthening the debt management framework is also needed.

“Monetary policy should continue prioritizing price stability, supported by a sustained commitment to refrain from monetary financing and safeguard central bank independence. Continued exchange rate flexibility and gradually phasing out the balance of payments measures remain critical to rebuild external buffers and facilitate external rebalancing.

“Restoring bank capital adequacy and strengthening governance and oversight of state-owned banks are top priorities to revive credit growth and support economic recovery.

“The authorities need to press ahead with their efforts to address structural challenges to unlock long-term potential. Key priorities include steadfast implementation of the governance reforms; further trade liberalization to promote exports and foreign direct investment; labor reforms to upgrade skills and increase female labor force participation; and state-owned enterprise reforms to improve efficiency and fiscal transparency, contain fiscal risks, and promote a level playing field for the private sector.

Executive Board Assessment

Executive Directors commended the authorities’ strong performance under the Fund‑supported program, noting that reforms are bearing fruit. The economy has started to recover, inflation remains low, revenue collection is improving, and reserves continue to accumulate. Directors underscored, however, that important vulnerabilities and uncertainties remain, including with respect to the ongoing debt restructuring and the upcoming elections. Against this backdrop, they called on the authorities to continue strengthening macroeconomic policies to restore economic stability and debt sustainability and to sustain the reform momentum to promote long‑term inclusive growth.

Directors underscored that restoring fiscal sustainability requires additional revenue measures underpinning the 2025 Budget, further tax administration reforms, as well as limiting tax exemptions and making them more transparent. They called for protecting growth‑enhancing and social spending, and for improving the social safety net. Directors welcomed the submission of the new Public Financial Management bill to Parliament, which would strengthen fiscal discipline and establish a solid fiscal framework. They noted that further efforts to strengthen the debt management framework are also needed. Directors welcomed the progress on achieving cost‑recovery in energy pricing, noting its criticality for containing risks from state‑owned enterprises (SOEs).

Directors welcomed the progress made to advance debt restructuring to restore Sri Lanka’s debt sustainability. They called for a swift finalization of the Memorandum of Understanding with the Official Creditor Committee and final agreements with the Export‑Import Bank of China. Directors stressed the importance of seeking comparable, transparent, and timely completion of restructurings with external private creditors consistent with program targets.

Directors emphasized that maintaining price stability remains the top priority for monetary policy, which requires anchoring inflation expectations, continuing to refrain from monetary financing, and the gradual unwinding of government security holdings as markets allow. They also stressed the importance of strengthening central bank independence. Directors underscored the need to continue building external buffers, while maintaining exchange rate flexibility to facilitate external rebalancing and preserve the credibility of the inflation targeting regime. They called for gradually phasing out the balance of payments measures.

Directors underscored the need to strengthen financial sector resilience to support the recovery. They called for swift completion of the restructuring of remaining domestic law, foreign currency loans and for adequate recapitalization of commercial and state‑owned banks. Directors welcomed the enactment of the Banking Act amendments and emphasized the importance of their effective implementation to enhance supervision and the governance of state‑owned banks. They also called for further efforts to strengthen the anti‑money laundering and counter‑terrorism financing framework.

Directors stressed that pressing ahead with governance and structural reforms, supported by development partners and IMF capacity development, is crucial to unlock growth potential. They welcomed the publication of the authorities’ action plan on the key governance reforms recommended in the Governance Diagnostic Report and called for its steadfast implementation. Directors also recommended prioritizing reforms to further liberalize trade, improve the investment climate and SOE efficiency, reduce gender gaps in the labor market, and mitigate climate vulnerabilities.

Sri Lanka: Selected Economic Indicators 2021–2029

 

  2021 2022   2023 2024 2025 2026 2027 2028 2029  
         
   
GDP and inflation (in percent)      
Real GDP 4.2   -7.3   -2.3   2.0   2.7 3.0 3.1 3.1 3.1  
Inflation (average) 1/ 6.0   45.2   17.4   7.0   5.8 5.4 5.2 5.1 5.0  
Inflation (end-of-period) 1/ 12.1   54.5   4.0   6.9   5.5 5.4 5.2 5.1 5.0  
GDP Deflator growth 8.0   47.5   17.5   9.8   6.9 5.4 5.2 5.1 5.0  
Nominal GDP growth 12.6   36.6   14.8   11.9   9.8 8.5 8.5 8.3 8.3  
                             
Savings and investment (in percent of GDP)        
National savings 33.0   27.6   33.9   32.5   31.0 31.3 31.9 31.8 31.8  
  Government -7.3   -6.4   -6.0   -3.4   -1.0 -0.1 0.3 0.7 0.7  
  Private 40.4   34.0   39.9   35.9   31.9 31.4 31.6 31.1 31.0  
National investment 36.7   28.6   30.8   32.1   32.1 32.4 32.8 32.7 32.6  
  Government 7.4   5.5   3.7   5.0   5.1 5.2 5.1 5.2 5.2  
  Private 29.4   23.1   27.1   27.1   27.0 27.3 27.7 27.5 27.4  
Savings-Investment balance -3.7   -1.0   3.1   0.5   -1.1 -1.2 -0.9 -0.9 -0.8  
  Government -14.7   -11.9   -9.6   -8.4   -6.0 -5.3 -4.8 -4.5 -4.4  
  Private 11.0   10.9   12.8   8.8   4.9 4.1 3.9 3.6 3.6  
                           
Public finance (in percent of GDP)      
Revenue and grants 8.3   8.4   11.1   13.6   15.1 15.3 15.4 15.4 15.4  
Expenditure 20.0   18.6   19.4   20.9   20.3 19.9 19.5 19.2 19.2  
Primary balance -5.7   -3.7   0.6   1.0   2.3 2.3 2.3 2.3 2.3  
Central government balance -11.7   -10.2   -8.3   -7.3   -5.2 -4.6 -4.1 -3.8 -3.8  
Central government gross financing needs 31.0   34.1   27.8   24.9   23.7 20.5 16.6 13.1 11.9  
Central government debt 102.7   115.9   109.8   108.8   108.4 108.3 106.6 103.2 100.1  
Public debt 2/ 114.8   126.3   115.7   114.2   113.1 112.5 110.2 106.5 103.1  
                             
Money and credit (percent change, end of period)                            
Reserve money 35.4   3.3   -1.5   18.8   11.0 8.5 8.5 8.3 8.3  
Broad money 13.2   15.5   7.3   14.9   10.4 8.5 8.5 8.3 8.3  
Domestic credit 19.5   18.8   -1.2   9.3   3.6 2.5 2.3 2.4 6.7  
Credit to private sector 13.1   6.4   -0.8   7.2   9.2 9.3 9.5 9.4 9.3  
Credit to private sector (adjusted for inflation) 7.2   -38.8   -18.2   0.2   3.4 4.0 4.3 4.3 4.3  
Credit to central government and public corporations 26.5   31.1   -1.6   11.0   -0.9 -3.4 -4.7 -5.5 3.2  
                             
Balance of Payments (in millions of U.S. dollars)                            
Exports 12,499   13,106   11,911   12,913   13,624 14,261 14,903 15,591 16,384  
Imports -20,638   -18,291   -16,811   -20,059   -22,565 -23,706 -24,362 -25,255 -26,363  
Current account balance -3,285   -744   2,644   412   -926 -1,031 -804 -819 -840  
Current account balance (in percent of GDP) -3.7   -1.0   3.1   0.5   -1.1 -1.2 -0.9 -0.9 -0.8  
Current account balance net of interest (in percent of GDP) -2.1   0.1   4.3   2.8   1.3 1.1 1.5 1.6 1.5  
Export value growth (percent) 24.4   4.9   -9.1   8.4   5.5 4.7 4.5 4.6 5.1  
Import value growth (percent) 28.5   -11.4   -8.1   19.3   12.5 5.1 2.8 3.7 4.4  
   
Gross official reserves (end of period)  
In millions of U.S. dollars 3,139   1,898   4,387   5,605   7,174 9,262 13,466 15,105 15,286  
In months of prospective imports of goods & services 2.0   1.2   2.4   2.7   3.3 4.1 5.8 6.2 6.3  
In percent of ARA composite metric 24.7   16.3   37.8   47.9   58.6 73.1 100.2 108.7 108.5  
Usable Gross official reserves (end of period) 3/        
In millions of U.S. dollars 1,565   462   2,951   4,169   7,174 9,262 13,466 15,105 15,286  
In months of prospective imports of goods & services 1.0   0.3   1.6   2.0   3.3 4.1 5.8 6.2 6.3  
In percent of ARA composite metric 12.3   4.0   25.4   35.6   58.6 73.1 100.2 108.7 108.5  
External debt (public and private)                            
In billions of U.S. dollars 58.4   57.4   52.7   53.6   55.6 58.0 62.3 64.0 65.8  
As a percent of GDP 65.9   77.0   62.5   61.1   64.4 65.7 68.5 67.2 65.0  
                             
Memorandum items:                            
Nominal GDP (in billions of rupees) 17,612   24,064   27,630   30,917   33,958 36,839 39,959 43,287 46,869  
Exchange Rate (period average) 198.8   322.6   327.5   …   … … … … …  
Exchange Rate (end of period) 200.4   363.1   323.9   …   … … … … …  
Sources: Data provided by the Sri Lankan authorities and IMF staff estimates.
IMF Communications Department
   

 

 

 

 



Foreign News

‘Time for Ukraine to get new president,’ says Trump after Zelensky condemns diesel deal

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[file pic]

US President Donald Trump has said he thinks “it’s time for Ukraine to get a new president” as he responded to Volodymyr Zelensky’s criticism of the US diesel deal with Russia.

The Ukrainian president warned a new deal to release millions of tonnes of Russian diesel into the US would provide Moscow with money to continue its war against his nation, calling it a gift to Russian President Vladimir Putin.

Trump told reporters outside the White House on Saturday that Zelensky “wants to make problems for the world” by continuing to authorise attacks on Russian refineries.

“He’d better damn well stop,” Trump said, before suggesting Ukraine should “get a new leader who can make a deal”.

Global fuel supplies, including diesel, have been severely limited by the war against Iran launched by the US and Israel, which led to the effective closure of the Strait of Hormuz, through which roughly a fifth of the world’s oil products usually flows.

Russia – a major producer – and Ukraine have recently intensified their strikes on each other’s energy infrastructure and transport facilities, further straining energy markets.

“We said, ‘you can do whatever you want to Russia, don’t hit the refineries’, because that’s a world problem that’s caused,” Trump continued.

“He could have made many deals and for some reason, he never does.”

Putin’s envoy Kirill Dmitriev described Trump’s intervention as “iconic and historic”, saying that Ukraine “needs leadership actually focused on peace”.

The US president confirmed on Friday that an agreement had been reached with Moscow to suspend sanctions on Russian diesel exports until 7 April.

Zelensky reacted by saying it would allow Moscow to raise new funds to source new military equipment to continue the war.

He also accused Moscow of taking the deal “to mean they can keep fighting, to mean they keep dropping bombs on cities” following deadly new strikes on Zaporizhzhia.

The Ukrainian president spoke to several allies on Saturday to discuss the latest developments, calling for “real decisions to protect lives in Ukraine” and to protect European security.

A Downing Street spokesperson said UK Prime Minister Andy Burnham had spoken to Zelensky and offered his “complete solidarity”.

The pair had agreed Russia should acquiesce to “an immediate energy ceasefire” and end its attacks on shipping in the Black Sea, the spokesperson said, as “this would immediately release more energy and food supplies into the global market”.

News of the US-Russia diesel deal was also met with criticism by EU’s foreign affairs chief Kaja Kallas, who echoed Zelensky in saying that suspending sanctions “provides Moscow with more revenues to wage war”, adding: “This is not the time to ease pressure on Russia, and Europe won’t.”

She said European foreign ministers intended to approve the biggest set of sanctions on Russia since the start of its full-scale invasion on Monday.

The deal with Russia is the latest effort from Trump to lower fuel prices in the US ahead of the midterm elections, after months spent grappling with the political consequences of the Iran war.

That conflict, which began in February, has sent the cost of petrol and in particular diesel skyrocketing, which has soured his standing with the American public who have been stung by the higher pump prices and knock-on effects that led to across-the-board inflation.

The average price of diesel is currently $6.28 (£4.74) a gallon, according to the AAA – up from last month’s $5.94 average, and $3.68 last year.

Under the deal, Russia would release an initial 300,000 tonnes of diesel “to the American and global marketplace” followed by an additional 500,000 tonnes in November.

A further million would follow, Trump wrote on Truth Social, and then another 3m tonnes “within a short period of time” – but he noted that this delivery will be “based on the condition of their diesel refineries”.

In the past 10 months, Russia experienced two waves of severe fuel shortages across the country due to Ukrainian drones strikes on its oil refineries.

Diesel production in Russia dropped by an estimated 30%, according to the International Energy Agency.

Trump had already called for new elections in Ukraine last December, saying Ukrainian voters should have the choice to replace Zelensky.

Since the war broke out in 2022 Ukraine has been under martial law, meaning elections are suspended.

[BBC]

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Renshaw 190 lifts Australia to 390 before Hazlewood strikes

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Matt Renshaw got out for 190 after tea [Cricinfo]

Matt Renshaw produced a herculean 190 and powered Australia to an unlikely first-innings total before Josh Hazelwood dismissed South Africa opener Ryan Rickelton for a duck late on day two of the first Test in Durban. Australia had their backs to the wall at 124 for 6 in familiar batting woes but Renshaw rescued the innings with his 397-ball marathon effort.

Renshaw fell short of what would have been a maiden double ton after being dismissed two balls into the final session, caught at slip off the bowling of offspinner Simon Harmer. His only other Test century was against Pakistan at the SCG in January 2017, when he made 184.

After 137.2 overs in the field, South Africa openers Rickelton and Aiden Markram faced a tough challenge under increasingly gloomy skies. A weary Rickelton did not fare well after edging Hazlewood to third slip in the second over, having attempted a lavish drive to a full delivery.

But Markram and new No. 3 David Bedingham were unruffled, and hit several attractive boundaries before bad light ended the day’s play just 8.4 overs into South Africa’s innings.

Having been on the back foot for much of the opening day, Australia were on top after day two as Renshaw produced the fourth highest score by an Australian in South Africa. Remarkably, he scored 174 of his runs with the last four batters, the most anyone has scored in a Test innings while batting with the tail since 2002.

Renshaw received strong support from the lower order, marked by an 86-run seventh-wicket partnership with Pat Cummins and a 134-run stand with Nathan Lyon, the second-most for the ninth wicket for Australia in their Test history.

Cummins and Lyon faced a combined 190 deliveries – that was 27 more than Australia’s top four batters – although batting became easier on a surface that on day one produced steep bounce and seam movement.

It has been a tough journey for Renshaw, who might have resurrected his Test career after providing a major tonic for Australia’s reshuffled batting order. He reached his century just before the lunch break with a boundary through the leg side, and raised his arms in delight and took off his helmet, showing off a beaming smile.

Highly disciplined but also showing a knack of going through the gears, Renshaw became the first Australia batter to face 300 balls in a Test innings since Usman Khawaja scored 232 against Sri Lanka in Galle in early 2025.

Renshaw has relished moving down to No. 5 after Nic Maddinson’s surprise selection as an opener, along with Cameron Green missing the match through injury. He had only filled the position four times previously – thrice during the 2023 tour of India, and once on the 2017 tour – with modest results, although has enjoyed success with Queensland there.

Renshaw had returned to Test cricket after three-and-a-half years as an opener against Bangladesh in August. While Maddinson’s selection has initially backfired, Renshaw looked at ease in the middle order, and equally untroubled against the seamers and spinners.

Having dominated much of the shortened first day, South Africa were left frustrated with their attack blunted by Renshaw. Seamers Wiaan Mulder, Marco Jansen and Anrich Nortje took nine wickets between them but struggled to consistently threaten on day two.

Spin duo Harmer and Keshav Maharaj claimed just one wicket from 48.2 overs, with Renshaw negating their influence, although the surface is expected to spin significantly later in the match. It was a disappointment for the sparse crowd in Durban, with the atmosphere rather subdued for Australia’s first Test series in South Africa since the 2018 sandpaper scandal.

Earlier on day two, Australia resumed their first innings on 187 for 6 after just 65.2 overs were bowled on a truncated opening day due to bad light. Renshaw and Cummins aimed to build on their unbeaten 63-run partnership from overnight. It did not take Renshaw long to reach his fourth Test half-century after edging Nortje through third slip and gully as he celebrated the milestone for the first time since March 2017.

Nortje, who played a starring role on day one after a three-and-a-half year exile from Test cricket, once again unfurled vicious short deliveries but occasionally tried to outfox Cummins by pitching up. A focused Cummins was unfazed, and pounced on a rare overpitched delivery with a beautiful square drive to the boundary. He had a fourth Test half-century in his sights – and the first since January 2024 – until, on 43, he edged a good-length delivery from Mulder to second slip.

Renshaw, meanwhile, showcased his much improved play against spin, reverse sweeping Maharaj with good effect to keep the scoreboard ticking over.

Much like Cummins, Mitchell Starc was intent on solid defence, and had a slice of luck when he edged Harmer through the hands of Markram at first slip as the ball flew to the boundary. South Africa had no hesitation in taking the second new ball, and Mulder capitalised when he clean bowled Starc with a cracker of a delivery that pitched on middle before crashing into the off stump.

But Renshaw kept South Africa at bay, and put the foot down in the back end of the elongated session. He hogged the strike after lunch as South Africa skipper Temba Bavuma deployed Maharaj and Harmer in tandem. The game went through a lull until the reintroduction of Nortje, who delivered a 143kph thunderbolt that whacked Renshaw on the grill of the helmet.

But Renshaw gave an immediate thumbs up and continued with his indefatigable effort after receiving medical attention. He reached 150 with a reverse sweep off Maharaj – and quite fittingly so, given his mastery of the stroke through the innings.

Lyon appeared set to bat through the entire second session before being trapped plumb lbw by a full delivery from Jansen, who was rewarded for a hostile spell before tea. The session was extended, but Hazlewood held firm with the bat before making an impact with the ball before stumps.

Scores:
South Africa 27 for 1 in 8.4 overs (Aiden Markram 15*, David Bedingham 12*; Josh Hazlewood 1-9) trail Australia 390 in 137.2 overs (Matt Renshaw 190, Pat Cummins 43; Marco Jansen 3-68, Wiaan  Mulder 4-68, Anrich Nortje 2-88 ) by 363 runs

[Cricinfo]

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Pope says death penalty ‘inadmissible’ as US plans to livestream execution

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[file pic] Pope Leo XIV attends a weekly general audience at St Peter's basilica in The Vatican [Aljazeera]

Pope Leo XIV has declared that the death penalty is “inadmissible” while his home country, the United States, announces plans to livestream an execution by firing squad.

Marking World Day Against the Death Penalty on Saturday, the pope reiterated the Catholic Church’s teaching on capital punishment, writing on X that it was “inadmissible because it is an attack on the inviolability and dignity of the person”.

“The common good can be safeguarded and the requirements of justice can be met without recourse to capital punishment,” his post said.

“Effective systems of detention have been developed that protect citizens while at the same time do not completely deprive those who are guilty of the possibility of redemption,” added the leader of the Catholic Church.

The American Pope’s comments come days after US Secretary of Defense Pete Hegseth said on Thursday that the firing squad execution of Nidal Malik Hasan on December 3 will be livestreamed.

Hasan was convicted of killing 13 people and wounding 32 others in a shooting at the Fort Hood military base in 2009.

Pope Leo did not specifically refer to the planned execution, or last month’s botched execution attempt on Christa Pike,  who survived two doses of the lethal injection in Tennessee.

But his post came hours after his top deputy, Cardinal Pietro Parolin, the Vatican secretary of state, told Vatican News that the plan to livestream Hasan’s execution was “unacceptable”.

It was Leo’s predecessor, Pope Francis, in 2018 who first amended official Catholic teaching to declare capital punishment “inadmissible” in all circumstances.

[Aljazeera]

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