With the International Monetary Fund (IMF) completing the first review of the 48-month Extended Fund Facility (EFF) for Sri Lanka on December 12, 2023 about USD 337 million will be disbursed, bringing the total disbursed to around USD 670 million to date.
The first endorsement and the second has led to many positive sentiments to the Sri Lanka economy starting with the country to record a 1.6% GDP growth rate for the first time since the ending of the economic crisis.
The First Capital Research under their monthly review “IMF 1st Review for Sri Lanka” says that the projected growth is to rebound from -3.6% in 2023 to 1.8% in 2024.
This will be supported by monetary conditions and eased import restrictions, but constrained by limited bank credit and fiscal consolidation.
According to this report Sri Lanka’s Gross International Reserves are projected to reach USD 5.4 billion by end -2024, driven by new program and project financing and Foreign Direct Investment.
Forecasting on the inflation, First Capital states that it is to increase to 4.8% by end 2023 due to October 2023 electricity tariff hike and further rise to 6.6% by end 2024 following the introduction of VAT measures. The Current Account balance is expected to post a deficit 0.8% of GDP, driven by strong import growth despite increased tourism earnings and remittances.
Commenting on the IMF program performance the report said that all end-June indicative targets were met, with the exception of tax revenues which fell short by nearly 8%. All end-June quantitative performance criteria (QPCs) and continuous QPCs were met, except for expenditure arrears.
“As of November 2023, Sri Lanka has met 46 out of 100 IMF commitments and has failed to meet 12 IMF commitments.” Most structural benchmarks due by end-October 2023 were either met or implemented with slight delays.
