New IMF funds for Sri Lanka may be delayed as review sees revenue shortfall

Al Jazeera  :
The International Monetary Fund did not reach a staff-level agreement with Sri Lanka in its first review under a $2.9bn bailout package, due to a potential shortfall in government revenue generation, says the lender.

Speaking after a two-week visit to the country, IMF delegation head Peter Breuer on Wednesday said a second tranche of about $330m under a lending programme would only be released after the IMF reaches a staff-level agreement, and there was no fixed timeline on when that would take place.

“Sri Lanka has made commendable progress in implementing difficult but much-needed reforms.

These efforts are bearing fruit as the economy is showing tentative signs of stabilisation,” the IMF said in a statement.

“The team will continue its discussions in the context of the First Review with the goal of reaching a staff-level agreement in the near term.”

The IMF delegation said despite early signs of stabilisation, full economic recovery is not yet assured and growth momentum remains subdued.

In the last six months, Sri Lanka has seen its runaway inflation drop to 1.3 percent in September, its currency appreciate by about 12 percent and foreign exchange reserves improve.

But the island has struggled to improve its revenue with additional measures likely to be taken in the upcoming budget in mid-November.

Despite revenue mobilisation having improved relative to last year, the IMF said revenue was expected to fall short of initial projections by nearly 15 percent by year end.

“While partially due to economic factors, the onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall.