Ms. Manuels Goretti who has almost 13 years of work experience in the International Monetary Fund currently is a Deputy Division Chief and Asia and Pacific Department and has held this position from February 2018 to date. Prior to this position Ms. Goretti was the Advisor to the 1st Deputy Managing Director for a little over two years.
She has served as Deputy Chief in the office of Risk Management Senior Economist European Department and Economist in Emerging Markets. She has experience in country assignments in Haiti, Romania and Bulgaria, Greece, Turkey, Poland, Peru and Portugal. She led the IMF staff Mission to Sri Lanka in February 14- 28, 2019 to undertake Fifth Review of Extended Fund Facility (EFF) supported Economic Reform Program of Sri Lanka in February 2019.
The IMF mission expressed optimism and predicted that economy is gradually stabilizing, however had to re-calibrate their own projections in two instances on the back of poor economic data and fiscal slippage from its original targets. Economic growth outlook for 2019 is expected to improve to about 3.5 percent from 3 percent in 2018. Inflation has regained in January and is projected to reach 4.5 percent in 2019. The current account deficit widened to 3.2 percent in 2018 but is expected to narrow in 2019 benefiting from the recent exchange rate correction.
The Mission noted that the primary surplus in the Budget in 2018 fell short of the program target due to weak revenue mobilization. The mission further noted foreign exchange reserves target missed by sizable margins.
The staff mission also observed that sustain fiscal consolidation through revenue effort and prudent spending is priority and welcomed government commitment to raise primary fiscal surplus to 1.5 percent of GDP in 2019 and reduce the budget deficit to 3.5 percent of GDP in 2020 and 2 percent of GDP over the medium term by adopting sound fiscal rules and new medium term debt strategies.
The Mission emphasized the need for a concerted effort by all stakeholders to preserve the gains of the economic reform program, support macro-economic stability and strengthen the economic resilience considering the high level of public debt and low international reserve buffers.
The Mission highlighted the need for an improved transparency, accountability and cost efficiently of large state owned enterprises. It also advised government to move forward with plans to bring Sri Lankan Airlines on sound commercial and financial footings and has insisted upon completing energy pricing reforms in order to address fiscal risks.
The staff team endorsed the commitment of the Central Bank to rebuild international reserve buffers and allow exchange rate flexibility. However, rapid slippage in the rupee and cost escalations has pushed the government to reign back the free fall with new fiscal measures on consumer imports.
It advised the Central Bank of Sri Lanka to continue to maintain a prudent and data dependent monetary policy, and stands ready to tighten policy rate inflationary pressures which re-emerged.
The team also emphasized the need for the government’s consistent implementation of the Inland Revenue Act and the modernization of the Inland Revenue and Customs Departments.
The Mission in its deliberation left three messages with the Government
- Revenue based fiscal consolidation and state enterprise reforms are needed.
- A prudent policy mix and exchange rate flexibility to rebuilt foreign exchange reserves are critical to strengthen resilience and market confidence.
- Strengthening institutions and fast tracking structural reforms can lay the foundation for strong sustainable and inclusive growth in Sri Lanka.
The IMF staff mission agreed to the government’s request to extend the EFF arrangement for an additional year to allow more time for the completion of the economic reform agenda. The IMF Board of Directors is expected to consider Sri Lanka’s request favorably in 2019.
By: BiZnomics Special Economic Correspondent
