Prompts authorities to establish Anti-Corruption Commission

by Sanath Nanayakkare

Urgent preparations for property taxation and the formation of Anti-Corruption Commission are being expected from Sri Lankan authorities by the International Monetary Fund (IMF) as key priorities.

The matter was discussed among other things on January 11 when a visiting IMF mission met with President Ranil Wickremesinghe.

According to the President’s Media Division (PMD), the meeting also highlighted the urgency of addressing fiscal matters, including passing amendments to the Banking Act and recapitalizing the banking sector.

As the IMF plans its upcoming formal review and Article 4 consultation, key areas of focus will include the new public financial management law, potential conflicts with the public-private partnership law, electricity tariffs and urgent preparations for property taxation.

The IMF has stressed the importance of perseverance with ongoing reforms, addressing fiscal issues and advancing governance agendas.

However, the IMF has applauded the country’s significant progress in implementing economic reforms and Sri Lanka’s courage in publishing the governance diagnostic, a first in Asia.

The IMF has highlighted the positive start of the programme, recognising the challenging reforms undertaken by Sri Lanka and their significant impact on the domestic population.

Senior Mission Chief for Sri Lanka, Peter Breuer has noted encouraging signs regarding the programme’s impact on stabilising the economy, particularly in policy-oriented variables and fiscal areas.

Breuer has said that a meeting the IMF had with Sri Lankan fiscal authorities revealed promising revenue collection, indicating the effectiveness of implemented policies since reaching a staff level agreement in the second half of 2022.

The IMF has emphasised the positive surprise in these developments have resulted in Sri Lanka boosting its confidence with the international community, official creditors and private creditors.

Peter Breuer has told President Wickremesinghe that with respect to revenue collection, there are ‘very encouraging’ numbers that basically highlight the policies the government implemented after the IMF had reached the staff level agreement in the second half of 2022 are working.

“They have had the intended effect. You’re collecting the revenue that’s needed to address the cause of the crisis. So, that really is very good news,” he has said.

Further, the board meeting has recognised Sri Lanka’s success in reducing inflation significantly, attributing it to the government’s efforts in monetary policy and scaling back monetary financing.

Positive outcomes, such as an increase in reserves had also been observed by the visiting delegation.

The ongoing governance reforms have been acknowledged by them as positive indicators, contributing to tentative economic growth in the third quarter, particularly in capital formation and machinery.

On the governance front, the IMF has put under its microscope the operationalizing of the Anti-Corruption Commission, publishing action plans and meeting with the Constitutional Council for insights into commissioner selection process.

As the two-week mission unfolds, further discussions between Sri Lankan authorities and the IMF are expected to delve deeper into these key areas, providing a comprehensive overview of the progress and challenges in Sri Lanka’s economic reform journey.