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Sri Lanka’s economic reform programme yielding first signs of recovery – IMF
The economic reform programme, implemented by the Sri Lankan authorities is yielding the first signs of recovery with positive real GDP growth in the third quarter of 2023, low inflation, increased revenue collection, and a build-up of external reserves, the IMF has said.
Staying the course on the reform agenda is necessary for this stabilization to evolve into broad-based and stable growth that will ensure a full and lasting economic recovery benefitting the people, the IMF has said.
Progress in meeting key commitments, under the IMF-supported programme, will be formally assessed in the context of the second review of the Extended Fund Facility (EFF) arrangement, alongside the forthcoming 2024 Article IV consultation assessing Sri Lanka’s economic health.
An International Monetary Fund (IMF) mission team, led by Mr. Peter Breuer, visited Sri Lanka from January 11 to 19, 2024, to discuss recent macroeconomic developments and progress in implementing economic and financial policies under the EFF arrangement. At the end of the mission, Mr. Breuer issued the following statement:
“The economic reform programme, implemented by the Sri Lankan authorities, is yielding the first signs of recovery. Real GDP recorded positive growth of 1.6 percent year-on-year in the third quarter of 2023, the first expansion in six consecutive quarters. Shortages of essentials have eased, and inflation remains contained. Gross international reserves increased by USD 2.5 billion during 2023, and preliminary data point to improved fiscal revenue collections during the fourth quarter of 2023. However, challenges remain as these improvements need to translate into improved living conditions for Sri Lanka’s people.
“In this context, sustaining the reform momentum and ensuring timely implementation of all programmes commitments are critical to rebuilding confidence and putting the recovery on a firm footing that will benefit all people. Swift progress towards the introduction of a progressive property tax is key to ensuring fair burden sharing while sustaining the revenue-based consolidation. Tax policy measures need to be accompanied by strengthening tax administration, removing tax exemptions, and actively eliminating tax evasion to make the reforms more sustainable and to further build confidence among creditors to support Sri Lanka’s efforts to regain debt sustainability.
“Building on the Central Bank of Sri Lanka’s success in taming inflation, future monetary policy decisions should remain prudent with a focus on keeping inflation expectations well anchored. Against continued uncertainty, it remains important to continue rebuilding external buffers through strong reserve accumulation. Protecting the poor and the vulnerable through improved targeting and better coverage of cash transfers remains critical.
“To safeguard the stability of the financial sector and bolster its capacity to support economic growth, the authorities need to urgently finalize amendments to the Banking Act in line with their commitment under the IMF-supported program, implement the bank recapitalization plan and strengthen the financial supervision and crisis management framework.
“Following the publication of the IMF Governance Diagnostic report, it is now imperative for the authorities to adopt their own action plan for implementing the recommendations in the report beyond the priority commitments under the EFF arrangement. At the same time, ensuring an enabling environment for governance and transparency reforms to take place is key to bolstering public confidence and facilitating implementation of these important efforts.
“The authorities have made commendable progress with putting debt on a path towards sustainability. The execution of the domestic debt restructuring was an important milestone. A swift completion of final agreements with official creditors and reaching a resolution with external private creditors remain critical. Progress in meeting key commitments under the IMF-supported program will be formally assessed in the context of the second review of the EFF arrangement alongside the forthcoming 2024 Article IV consultation assessing Sri Lanka’s economic health.
“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka (CBSL) Governor Dr. P. Nandalal Weerasinghe, Speaker Mr. Mahinda Yapa Abeywardana, Minister Mr. Kanchana Wijesekera, Minister Mr. Wijeyadasa Rajapakse,State Minister Mr. Shehan Semasinghe, Secretary to the Treasury Mr. K M Mahinda Siriwardana, Governor of Northern Province Mrs. P.S.M.Charles, Governor of Eastern Province Senthil Thondaman, and other senior government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners.
“We would like to thank the authorities for the excellent collaboration during the mission, including during the mission’s visit to the Northern and Eastern provinces. This visit enriched the mission team’s understanding of the challenges as well as the potential of Sri Lanka. We reaffirm our commitment to support Sri Lanka for a full economic recovery from the crisis.”
The inauguration and commencement of three development projects implemented in the country with the assistance of the Indian Government took place on Saturday (05)
These projects include the commencement of construction of the Sampur Solar Power Plant, which will add 50 megawatts to the national grid, the inauguration of the Temperature and Humidity Controlled Agro Cold Storage complex in Dambulla and the installation of solar panels on 5,000 religious sites. President Anura Kumara Disanayake and Prime Minister Shri Narendra Modi jointly inaugurated and launched these projects via virtual technology following their official meeting at the Presidential Secretariat on Saturday morning.
Prime Minister Modi’s visit to Sri Lanka reaffirms the concept of “Friendship of Centuries, Commitment to a Prosperous Future,” strengthening the deep-rooted ties between the two nations.
The Sampur Solar Power Plant is part of the Eastern Renewable Energy Zone, which is being established under Sri Lanka’s Long-Term Generation Expansion Plan (LTGEP). It is being developed by Trincomalee Power Company, a joint venture between India’s NTPC Limited and the Ceylon Electricity Board (CEB).
The project is planned in two phases, with the second phase scheduled to commence in 2027. A 500-acre land area has been allocated for this initiative, under the first phase it will contribute 50 megawatts of electricity to the national grid. The project will incorporate state-of-the-art N-type TOPCon solar cell technology, enhancing energy security and promoting a shift from fossil fuel dependency to renewable energy sources. Consequently, the Sampur Solar Power Project is expected to reduce annual carbon dioxide emissions by approximately 200,000 tonnes.
The Dambulla Agricultural Storage Complex (Cold Storage Facility), with a capacity of 5,000 metric tons and equipped with temperature and humidity control, was inaugurated today with the objective of reducing post-harvest losses by approximately 40%, stabilizing fluctuations in agricultural product prices, ensuring the supply of high-quality food to consumers and enhancing agricultural sustainability.
To facilitate research on advanced storage methods for different crops, the facility includes six storage chambers, each designed to simulate various climatic conditions. This is the first facility of its kind in Sri Lanka, built at a total cost of LKR 524 million, with LKR 300 million provided as a grant by the Government of India and LKR 224 million contributed by the Government of Sri Lanka.
The Government of India has invested USD 17 million on the project to install solar panels on 5,000 religious sites and places of worship representing all major religions in all 25 districts. The nitiative, is being implemented jointly by the Ceylon Electricity Board, the Sri Lanka Sustainable Energy Authority and Lanka Electricity Company (Pvt) Ltd.
Under this project, 5,000 solar panel systems with a capacity of 5 kW each will be installed on the rooftops of Buddhist, Hindu, Muslim, Catholic and Christian places of worship. This is expected to add 25 megawatts of solar power capacity to the national electricity grid. The initiative underscores the government’s commitment to a cost-effective, sustainable and reliable energy system.
[PMD]
In appreciation of the enduring friendship and cooperation extended to the people of Sri Lanka, President Anura Kumara Disanayake conferred the prestigious Sri Lanka Mitra Vibhushana Award on Indian Prime Minister Shri Narendra Modi.
The President presented the award to Indian Prime Minister Shri Narendra Modi following an official meeting held on Saturday (05) at the Presidential Secretariat. The meeting took place as part of Prime Minister Modi’s state visit to Sri Lanka, undertaken at the invitation of President Anura Kumara Disanayake.
[PMD]
Seven Memoranda of Understanding (MoUs) between India and Sri Lanka, covering several key sectors, were exchanged on Saturday (05) morning at the Presidential Secretariat in the presence of President Anura Kumara Disanayake and Indian Prime Minister Shri Narendra Modi.
Marking a new chapter in Indo-Sri Lanka relations, these agreements focus on enhancing cooperation in the fields of energy, digitalization, defence, healthcare, and development assistance.
Accordingly, the following MoUs were exchanged:
1. MoU between the Government of India and the Government of Sri Lanka for Implementation of HVDC Interconnection for Import/Export of Power- Exchanged by Prof. K.T.M. Udayanga Hemapala, Secretary of the Ministry Energy of Sri Lanka, and Vikram Misri, Foreign Secretary of India.
2. MoU on Cooperation in the Field of Sharing Successful Digital Solutions Implemented at Population Scale for Digital Transformation. – Exchanged by Mr. Varuna Sri Dhanapala, Secretary of the Ministry of Digital Economy of Sri Lanka, and Vikram Misri, Foreign Secretary of India.
3. MoU between the Government of India, the Government of Sri Lanka, and the Government of United Arab Emirates for Cooperation in Development of Trincomalee as an Energy Hub – Exchanged by Prof. K.T.M. Udayanga Hemapala, Secretary of the Ministry of Energy of Sri Lanka; Vikram Misri, Foreign Secretary of India; and Khaled Nasser AlAmeri, Ambassador of the United Arab Emirates to Sri Lanka.
4. MoU on Defence Cooperation between India and Sri Lanka – Exchanged by Retired Air Vice Marshal H.S. Sampath Thuyacontha, Secretary of the Ministry of Defence of Sri Lanka, and Vikram Misri, Foreign Secretary of India.
5. MoU on Cooperation in the Field of Health & Medicine between the Ministry of Health and Family Welfare of India and the Ministry of Health and Mass Media of Sri Lanka- Exchanged by Specialist Dr. Anil Jasinghe, Secretary of the Ministry of Health and Mass Media of Sri Lanka, and Mr. Santosh Jha, High Commissioner of India to Sri Lanka.
06 A Memorandum of Understanding (MoU) on Pharmaceutical Cooperation was exchanged between the Indian Pharmaceutical Export Promotion Council of the Ministry of Health and Family Welfare of India and the National Medicines Regulatory Authority of Sri Lanka – The MoU was exchanged by Secretary to the Ministry of Health and Mass Media, Specialist Dr. Anil Jasinghe, and Santosh Jha, High Commissioner of India to Sri Lanka.
07 A Memorandum of Understanding (MoU) on Multi-sectoral Grant Assistance for Eastern Province was exchanged by Secretary to the Ministry of Finance, Economic Stabilization, and National Policies, Mahinda Siriwardana and Santosh Jha, High Commissioner of India to Sri Lanka.
A number of Cabinet Ministers representing the Government of Sri Lanka, along with India’s Minister of External Affairs Dr. S. Jaishankar, India’s National Security Advisor Ajit Doval, and other members of the Indian delegation, participated in this event.
President and Indian PM jointly launch and inaugurate three development projects
President confers Sri Lanka Mitra Vibhushana Award on Indian Prime Minister Shri Narendra Modi
Seven MOUs exchanged between India and Sri Lanka covering multiple sectors
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