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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
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
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Myanmar votes as military holds first election since 2021 coup
Polls have opened in Myanmar’s first general election since the country’s military toppled Nobel laureate Aung San Suu Kyi’s democratically elected government in a 2021 coup.
The heavily restricted election on Sunday is taking place in about a third of the Southeast Asian nation’s 330 townships, with large areas inaccessible amid a raging civil war between the military and an array of opposition forces.
Following the initial phase, two rounds of voting will be held on January 11 and January 25, while voting has been cancelled in 65 townships altogether.
“This means that at least 20 percent of the country is disenfranchised at this stage,” said Al Jazeera’s Tony Cheng, reporting from Myanmar’s largest city, Yangon. “The big question is going to be here in the cities, what is the turnout going to be like?”
In Yangon, polling stations opened at 6am on Sunday (23:30 GMT, Saturday), and once the sun was up, “we’ve seen a relatively regular flow of voters come in,” said Cheng.
“But the voters are generally middle aged, and we haven’t seen many young people. When you look at the ballot, there are only few choices. The vast majority of those choices are military parties,” he said.
The election has been derided by critics – including the United Nations, some Western countries and human rights groups – as an exercise that is not free, fair or credible, with anti-military political parties not competing.
Aung San Suu Kyi, who was deposed by the military months after her National League for Democracy (NLD) won the last general election by a landslide in 2020, remains in detention, and her party has been dissolved.
The pro-military Union Solidarity and Development Party (USDP) is widely expected to emerge as the largest party.
The military, which has governed Myanmar since 2021, said the vote is a chance for a new start, politically and economically, for the nation of 55 million people, with Senior General Min Aung Hlaing consistently framing the polls as a path to reconciliation.
Dressed in civilian clothes, the military chief cast his ballot shortly after polling stations opened in Naypyidaw, the country’s capital. He then held up an ink-soaked figure and smiled widely.
Voters must dip a finger into indelible ink after casting a ballot to ensure they do not vote more than once.
He told reporters afterwards that the elections are free and fair, and the vote was not tarnished because it is being held by the military.
The state-run Global New Light of Myanmar, in an opinion piece on Sunday, said the poll would open a new chapter and “serve as bridge for the people of Myanmar to reach a prosperous future”.
Earlier, it reported that election observers from Russia, China, Belarus, Kazakhstan, Cambodia, Vietnam, Nicaragua and India have flown into the country ahead of the polls.
But with fighting still raging in many areas of the country, the UN’s Special Rapporteur on Myanmar, Tom Andrews called on the international community to reject the military-run poll.
“An election organised by a junta that continues to bomb civilians, jail political leaders and criminalise all forms of dissent is not an election – it is a theatre of the absurd performed at gunpoint,” Andrews said in a statement.
“This is not a pathway out of Myanmar’s crisis. It is a ploy that will perpetuate repression, division and conflict,” he said.
The civil war, which was triggered by the 2021 coup, has killed an estimated 90,000 people, displaced 3.5 million and left some 22 million people in need of humanitarian assistance.
According to the Assistance Association for Political Prisoners, more than 22,000 people are currently detained for political offences.
In downtown Yangon, stations were cordoned off overnight, with security staff posted outside, while armed officers guarded traffic intersections. Election officials set up equipment and installed electronic voting machines, which are being used for the first time in Myanmar.
The machines will not allow write-in candidates or spoiled ballots.
Among a trickle of early voters in the city was 45-year-old Swe Maw, who dismissed international criticism.
“It’s not an important matter,” he told the AFP news agency. “There are always people who like and dislike.”
In the central Mandalay region, 40-year-old Moe Moe Myint said it was “impossible for this election to be free and fair”.
“How can we support a junta-run election when this military has destroyed our lives?” she told AFP. “We are homeless, hiding in jungles, and living between life and death,” she added.
The second round of polling will take place in two weeks’ time, before the third and final round on January 25.
Dates for counting votes and announcing election results have not been declared.
Analysts say the military’s attempt to establish a stable administration in the midst of an expansive conflict is fraught with risk, and that significant international recognition is unlikely for any military-controlled government.
“The outcome is hardly in doubt: a resounding USDP victory and a continuation of army rule with a thin civilian veneer,” wrote Richard Horsey, an analyst at the International Crisis Group in a briefing earlier this month.
“But it will in no way ease Myanmar’s political crisis or weaken the resolve of a determined armed resistance. Instead, it will likely harden political divisions and prolong Myanmar’s state failure. The new administration, which will take power in April 2026, will have few better options, little credibility and likely no feasible strategy for moving the country in a positive direction,” he added.

[Aljazeera]
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Interment of singer Latha Walpola at Borella on Wednesday [31st]
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Foreign News
Ex-Malaysia PM Najib Razak given 15-year jail term over state funds scandal
Former Malaysian Prime Minister Najib Razak has been jailed for 15 years for abuse of power and money laundering, in his second major trial for a multi-billion-dollar state funds scandal.
Najib, 72, was accused of misappropriating nearly 2.3 billion Malaysian ringgit ($569m; £422m) from the nation’s sovereign wealth fund 1Malaysia Development Berhad (1MDB).
On Friday afternoon a judge found him guilty in four charges of abuse of power and 21 charges of money laundering.
The former PM is already in jail after he was convicted years ago in another case related to 1MDB.
Friday’s verdict comes after seven years of legal proceedings, which saw 76 witnesses called to the stand.
The verdict, delivered in Malaysia’s administrative capital Putrajaya, is the second blow in the same week to the embattled former leader, who has been imprisoned since 2022.
He was handed four 15-year sentences on abuse of power charges, as well as five years each on 21 money laundering charges. The jail terms run concurrently under Malaysian law.
On Monday, the court rejected his application to serve the remainder of his sentence under house arrest.
But the former prime minister retains a loyal base of supporters, who claim that he’s a victim of unfair rulings and who have showed up at his trials calling for his release.
On Friday, dozens of people gathered outside the court in Putrajaya in support of Najib.
The 1MDB scandal made headlines across the world when it came to light a decade ago, embroiling prominent figures from Malaysia to Goldman Sachs and Hollywood.
Investigators estimated that $4.5bn was siphoned from the state-owned wealth fund into private pockets, including Najib’s.
Najib’s lawyers claim that he had been misled by his advisers – in particular the financier Jho Low, who has maintained his innocence but remains at large.
But the argument has not convinced Malaysia’s courts, which previously found Najib guilty of embezzlement in 2020.
That year, Najib was convicted of abuse of power, money laundering and breach of trust over 42 million ringgit ($10m; £7.7m) transferred from SRC International – a former unit of 1MDB – into his private accounts.
He was sentenced to 12 years in prison, but saw his jail term halved last year.
The latest case concerns a larger sum of money, also tied to 1MDB, received by his personal bank account in 2013. Najib said he had believed the money was a donation from the late Saudi King Abdullah – a claim rejected by the judge on Friday.
Separately Najib’s wife, Rosmah Mansor, was sentenced to ten years in jail in 2022 for bribery. She is free on bail pending an appeal against her conviction.
The scandal has had profound repercussions on Malaysian politics. In 2018 it led to a historic election loss for Najib’s Barisan Nasional coalition, which had governed the country since its independence in 1957.
Now, the recent verdicts has highlighted fissures in Malaysia’s ruling coalition, which includes Najib’s party United Malays National Organisation (UMNO).
Najib’s failed house arrest bid on Monday was met with disappointment from his allies but celebrated by his critics within the same coalition.
Malaysia’s Prime Minister Anwar Ibrahim called for politicians on all sides to respect the court’s decisions.
Former Malaysian lawmaker Tony Pua told the BBC’s Newsday programme that the verdict would “send a message” to the country’s leaders, that “you can get caught for corruption even if you’re number one in the country like the prime minister”.
But Cynthia Gabriel, founding director of Malaysia’s Center to Combat Corruption and Cronyism, argued that the country has made little headway in anti-corruption efforts despite the years of reckoning after the 1MDB scandal.
Public institutions have not been strengthened enough to reassure Malaysians that “the politicians they put into power would actually serve their interests” instead of “their own pockets”, she told Newsday.
“Grand corruption continues in different forms”, she added. “We don’t know at all if another 1MDB could occur, or may have already occurred.”
(BBC)
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