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Ranga Sirilal

Mar 26 • 8 tweets • 2 min read

Views similar to the Article IV Report have been expressed over the past several months by local and foreign commentators on Sri Lanka.

The CBSL has also continued to publish its analyses, in addition to providing further in-depth analyses on a confidential basis on market-sensitive policy matters to the Government and engaging in a continued close dialogue with the Government on the same.

Furthermore, several policy adjustments, as indicated in the IMF Report, have already been made by the MoF and the CBSL. These include monetary policy tightening since August 2021, allowing exchange rate flexibility, removing restrictions on foreign exchange market transactions,

implementing envisaged revenue enhancing measures, and allowing market-based price adjustments to key commodities.
Working closely with the Government, the CBSL stands ready for a closer engagement with the IMF, in order to ensure that the benefits of such an engagement

outweigh any costs associated with the same, from the perspective of the general public, and the business and investor community.

Central bank withdraws this statement.

“Please disregard the previous press release on "CBSL's stance on IMF Article IV Report".
Amended Press Release will be circulated in due course.”

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Ranga Sirilal

@rangaba

Mar 26

Herewith the main IMF recommendations with my translations.

Recommendations. To restore macroeconomic stability and debt sustainability, implementing a credible and coherent strategy covering both the near and medium term is needed.

Staff recommends a comprehensive set of policies with specific measures:
•Substantial revenue-based fiscal consolidation. Reforms should focus on strengthening VAT and income taxes, through rate increases and base broadening measures.

Fiscal adjustment should be accompanied by energy pricing reforms to reduce fiscal risks from lossmaking public enterprises. Institution building reforms, such as revamping the fiscal rule, would help ensure the credibility of the strategy.

Read 8 tweets

Ranga Sirilal

@rangaba

Mar 26

IMF’s Sri Lanka: 2021 Article IV Consultation Staff Report says that COVID-19 severely hit the economy, causing a loss of tourism receipts and necessitating several strict lockdowns. Pre-pandemic tax cuts and the impact of COVID-19 led to fiscal deficits larger than 10 percent of

GDP in 2020 and 2021 and a rapid increase in public debt to 119 percent of GDP in 2021. Sri Lanka’s access to international capital markets was lost in 2020, prompting a decline of international reserves to critically low levels and large-scale direct lending to the government by

the Central Bank of Sri Lanka (CBSL). External debt repayments and a widening current account deficit have led to foreign exchange (FX) shortages, while the official exchange rate has been de facto fixed since April 2021. Inflation is on the rise, reaching double digits

Read 9 tweets