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Sri Lanka’s IMF programme was supposed to succeed by improving governance. Will it?
On June 12, the IMF board will sign off on Sri Lanka’s third disbursement under the current programme. But Sri Lanka is still failing on the governance improvements that are foundational for its economic recovery. According to the latest update of the ‘IMF Tracker’ by Verité Research, Sri Lanka verifiably failed to meet 25% of the commitments due by the end of May 2024 under the programme renewed in December 2023. Of the 63 commitments due, 32 were classified as ‘met’, 16 as ‘not met’, and 15 as ‘unknown’ – meaning data was not available to verify the status. The prognosis of failing on governance comes from examining the 16 commitments that were ‘not met’. 7 of them were on financial management, 6 on financial transparency, and 3 on anti-corruption measures. Sri Lanka is failing to comply with the IMF programme precisely on the aspects that were diagnosed as the root causes of the economic crisis – problems of financial transparency, management and corruption. Many of the commitments not complied with at the second disbursement were also related to actions on transparency and anti-corruption. The governance diagnostic assessment (GDA) led by the IMF, published in September 2023, was the first-ever IMF-led GDA for an Asian country. It also aligned closely with a separate GDA published by Sri Lanka’s civil society. The hope was that this 17th IMF programme would decisively solve Sri Lanka’s economic woes by dealing with the root causes of corruption and mal-governance. However, the lack of progress on these actions – which are now being repeatedly glossed over in programme renewal – suggests that the IMF is not giving adequate weightage to compliance with the governance commitments. The standard fiscal measures to which the IMF has given higher weightage are those that were present in the 16 previous IMF programmes as well. What is distinctive about the current programme is the focus on meaningful measures to improve transparency and anti-corruption. If these measures do not become the foundation of Sri Lanka’s economic recovery, it will be a missed opportunity that then fosters the cycles of the past – which is to return Sri Lanka to yet another IMF programme within five years of completing the previous. Case example of serial default on governance commitments The staff-level agreement signed in September 2022 committed Sri Lanka to “An online transparency platform publishing on a semi-annual basis (i) all significant public procurement contracts, (ii) a list of all firms receiving tax exemptions through the Board of Investment, and (iii) a list of individuals and firms receiving tax exemptions on luxury vehicle imports” by March 2023. Sri Lanka did not comply, even by the end of November 2023. In December last year, when the programme was renewed, this commitment scope was restated as “Publish on a semi-annual basis on a designated website (i) all public procurement contracts above Rs. 1 billion, along with comprehensive information in a searchable format on contract award winners; (ii) a list of all firms receiving tax exemptions through the Board of Investment and the SDP, and an estimation of the value of the tax exemption; and (iii) a list of firms receiving tax exemptions on luxury vehicle import” and it was elevated in importance by designating it a structural benchmark that should be completed by the end of December 2023. However, by the end of May 2024, Sri Lanka was still in serious breach of this long overdue commitment.
Featured Insight
Sri Lanka’s IMF programme was supposed to succeed by improving governance. Will it?
On June 12, the IMF board will sign off on Sri Lanka’s third disbursement under the current programme. But Sri Lanka is still failing on the governance improvements that are foundational for its economic recovery. According to the latest update of the ‘IMF Tracker’ by Verité Research, Sri Lanka verifiably failed to meet 25% of the commitments due by the end of May 2024 under the programme renewed in December 2023. Of the 63 commitments due, 32 were classified as ‘met’, 16 as ‘not met’, and 15 as ‘unknown’ – meaning data was not available to verify the status. The prognosis of failing on governance comes from examining the 16 commitments that were ‘not met’. 7 of them were on financial management, 6 on financial transparency, and 3 on anti-corruption measures. Sri Lanka is failing to comply with the IMF programme precisely on the aspects that were diagnosed as the root causes of the economic crisis – problems of financial transparency, management and corruption. Many of the commitments not complied with at the second disbursement were also related to actions on transparency and anti-corruption. The governance diagnostic assessment (GDA) led by the IMF, published in September 2023, was the first-ever IMF-led GDA for an Asian country. It also aligned closely with a separate GDA published by Sri Lanka’s civil society. The hope was that this 17th IMF programme would decisively solve Sri Lanka’s economic woes by dealing with the root causes of corruption and mal-governance. However, the lack of progress on these actions – which are now being repeatedly glossed over in programme renewal – suggests that the IMF is not giving adequate weightage to compliance with the governance commitments. The standard fiscal measures to which the IMF has given higher weightage are those that were present in the 16 previous IMF programmes as well. What is distinctive about the current programme is the focus on meaningful measures to improve transparency and anti-corruption. If these measures do not become the foundation of Sri Lanka’s economic recovery, it will be a missed opportunity that then fosters the cycles of the past – which is to return Sri Lanka to yet another IMF programme within five years of completing the previous. Case example of serial default on governance commitments The staff-level agreement signed in September 2022 committed Sri Lanka to “An online transparency platform publishing on a semi-annual basis (i) all significant public procurement contracts, (ii) a list of all firms receiving tax exemptions through the Board of Investment, and (iii) a list of individuals and firms receiving tax exemptions on luxury vehicle imports” by March 2023. Sri Lanka did not comply, even by the end of November 2023. In December last year, when the programme was renewed, this commitment scope was restated as “Publish on a semi-annual basis on a designated website (i) all public procurement contracts above Rs. 1 billion, along with comprehensive information in a searchable format on contract award winners; (ii) a list of all firms receiving tax exemptions through the Board of Investment and the SDP, and an estimation of the value of the tax exemption; and (iii) a list of firms receiving tax exemptions on luxury vehicle import” and it was elevated in importance by designating it a structural benchmark that should be completed by the end of December 2023. However, by the end of May 2024, Sri Lanka was still in serious breach of this long overdue commitment.
Featured Insight
Sri Lanka’s IMF programme was supposed to succeed by improving governance. Will it?
On June 12, the IMF board will sign off on Sri Lanka’s third disbursement under the current programme. But Sri Lanka is still failing on the governance improvements that are foundational for its economic recovery. According to the latest update of the ‘IMF Tracker’ by Verité Research, Sri Lanka verifiably failed to meet 25% of the commitments due by the end of May 2024 under the programme renewed in December 2023. Of the 63 commitments due, 32 were classified as ‘met’, 16 as ‘not met’, and 15 as ‘unknown’ – meaning data was not available to verify the status. The prognosis of failing on governance comes from examining the 16 commitments that were ‘not met’. 7 of them were on financial management, 6 on financial transparency, and 3 on anti-corruption measures. Sri Lanka is failing to comply with the IMF programme precisely on the aspects that were diagnosed as the root causes of the economic crisis – problems of financial transparency, management and corruption. Many of the commitments not complied with at the second disbursement were also related to actions on transparency and anti-corruption. The governance diagnostic assessment (GDA) led by the IMF, published in September 2023, was the first-ever IMF-led GDA for an Asian country. It also aligned closely with a separate GDA published by Sri Lanka’s civil society. The hope was that this 17th IMF programme would decisively solve Sri Lanka’s economic woes by dealing with the root causes of corruption and mal-governance. However, the lack of progress on these actions – which are now being repeatedly glossed over in programme renewal – suggests that the IMF is not giving adequate weightage to compliance with the governance commitments. The standard fiscal measures to which the IMF has given higher weightage are those that were present in the 16 previous IMF programmes as well. What is distinctive about the current programme is the focus on meaningful measures to improve transparency and anti-corruption. If these measures do not become the foundation of Sri Lanka’s economic recovery, it will be a missed opportunity that then fosters the cycles of the past – which is to return Sri Lanka to yet another IMF programme within five years of completing the previous. Case example of serial default on governance commitments The staff-level agreement signed in September 2022 committed Sri Lanka to “An online transparency platform publishing on a semi-annual basis (i) all significant public procurement contracts, (ii) a list of all firms receiving tax exemptions through the Board of Investment, and (iii) a list of individuals and firms receiving tax exemptions on luxury vehicle imports” by March 2023. Sri Lanka did not comply, even by the end of November 2023. In December last year, when the programme was renewed, this commitment scope was restated as “Publish on a semi-annual basis on a designated website (i) all public procurement contracts above Rs. 1 billion, along with comprehensive information in a searchable format on contract award winners; (ii) a list of all firms receiving tax exemptions through the Board of Investment and the SDP, and an estimation of the value of the tax exemption; and (iii) a list of firms receiving tax exemptions on luxury vehicle import” and it was elevated in importance by designating it a structural benchmark that should be completed by the end of December 2023. However, by the end of May 2024, Sri Lanka was still in serious breach of this long overdue commitment.
Featured Insight
Sri Lanka’s IMF programme was supposed to succeed by improving governance. Will it?
On June 12, the IMF board will sign off on Sri Lanka’s third disbursement under the current programme. But Sri Lanka is still failing on the governance improvements that are foundational for its economic recovery. According to the latest update of the ‘IMF Tracker’ by Verité Research, Sri Lanka verifiably failed to meet 25% of the commitments due by the end of May 2024 under the programme renewed in December 2023. Of the 63 commitments due, 32 were classified as ‘met’, 16 as ‘not met’, and 15 as ‘unknown’ – meaning data was not available to verify the status. The prognosis of failing on governance comes from examining the 16 commitments that were ‘not met’. 7 of them were on financial management, 6 on financial transparency, and 3 on anti-corruption measures. Sri Lanka is failing to comply with the IMF programme precisely on the aspects that were diagnosed as the root causes of the economic crisis – problems of financial transparency, management and corruption. Many of the commitments not complied with at the second disbursement were also related to actions on transparency and anti-corruption. The governance diagnostic assessment (GDA) led by the IMF, published in September 2023, was the first-ever IMF-led GDA for an Asian country. It also aligned closely with a separate GDA published by Sri Lanka’s civil society. The hope was that this 17th IMF programme would decisively solve Sri Lanka’s economic woes by dealing with the root causes of corruption and mal-governance. However, the lack of progress on these actions – which are now being repeatedly glossed over in programme renewal – suggests that the IMF is not giving adequate weightage to compliance with the governance commitments. The standard fiscal measures to which the IMF has given higher weightage are those that were present in the 16 previous IMF programmes as well. What is distinctive about the current programme is the focus on meaningful measures to improve transparency and anti-corruption. If these measures do not become the foundation of Sri Lanka’s economic recovery, it will be a missed opportunity that then fosters the cycles of the past – which is to return Sri Lanka to yet another IMF programme within five years of completing the previous. Case example of serial default on governance commitments The staff-level agreement signed in September 2022 committed Sri Lanka to “An online transparency platform publishing on a semi-annual basis (i) all significant public procurement contracts, (ii) a list of all firms receiving tax exemptions through the Board of Investment, and (iii) a list of individuals and firms receiving tax exemptions on luxury vehicle imports” by March 2023. Sri Lanka did not comply, even by the end of November 2023. In December last year, when the programme was renewed, this commitment scope was restated as “Publish on a semi-annual basis on a designated website (i) all public procurement contracts above Rs. 1 billion, along with comprehensive information in a searchable format on contract award winners; (ii) a list of all firms receiving tax exemptions through the Board of Investment and the SDP, and an estimation of the value of the tax exemption; and (iii) a list of firms receiving tax exemptions on luxury vehicle import” and it was elevated in importance by designating it a structural benchmark that should be completed by the end of December 2023. However, by the end of May 2024, Sri Lanka was still in serious breach of this long overdue commitment.
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Budget 2021
Budget 2021
Detailed analysis of the 2021 budget.
From The PF Wire
Source:
Daily Mirror
Governement to borrow additional LKR 400 Bn for de...
The Cabinet of Ministers cleared a request to increase the government’s credit limit by further Rs.400 billion to Rs.3.39 trillion for 2021, under Appropriation Act No. 7 of 2020, to meet the pandemic-related additional expenditu...
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Source:
economynext
Sri Lanka budget deficit 4.7-pct of GDP up to June...
Sri Lanka’s budget deficit for the six months to June 2021 was 781 billion rupees, up 6 percent from a year earlier, or 4.7 percent of projected gross domestic product, data shows, though outstanding debt was accelerating at a faster p...
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Insight on Budget 2021
Inconsistency in Budget Numbers Across D...
In November 2020, the Government presented the Budget Speech for 2021....
Missing Estimates in Budget Speeches
The budget for the year 2021 featured a number of missing estimates fo...
Budget 2021: Trade & Industry
The Budget 2021 Debate for the Ministry of Industries & Ministry of Trade is happening today...
Public Report on the 2021 Budget: Assess...
This report provides an assessment and an...
Ministries with Largest Change in Expend...
This infographic captures the change in a...
Breakdown of Government Revenue, 2000 to...
Here is a s...
New Tax Proposals: 2021 Budget
Summary of 2021 Budget
Here’s a summary of government expenditure, revenue and financing allocated in the 2021 Bud...
Total Government Revenue 2021
The chart below shows the breakdown of the budgeted government reven...
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Featured
Sri Lanka met 29 IMF commitments and failed 3 by e...
Sri Lanka had met 29 of the 100 trackable commitments of the International Monetary Fund (IMF) programme and had failed on three as of the end of May 2023, according to ‘The IMF Tracker’ dashboard of Verité Research.
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The Maldives’ primary deficit still remains high
The Maldives’ primary deficit has increased since 2020, raising concerns about the country’s debt sustainability. This contrasts with Sri Lanka, where the primary deficit also increased but recovered, following its sus...
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VAT revenue collection: Maldives highest, Sri Lank...
Sri Lanka has the lowest tax revenue collected through Value Added Tax (VAT) in South Asia while Maldives with a lower tax rate collects nearly 5 times more through its Goods and Services Tax (GST).
Read More
