• IMF approves EFF review based on SL’s assurance to address central govt. expenditure discrepancies
• Corrective actions include improved reporting and a two-year plan to clear outstanding arrears

Sri Lanka has assured the International Monetary Fund (IMF) that it will clear the under-reported central government expenditure arrears within a period of two years, IMF Mission Chief for Sri Lanka Evan Papageorgiou said.

Speaking to TVDerana last week, he said that the IMF executive board approved the fourth review of the extended fund facility (EFF) based on the assurances given by the authorities to take corrective measures to clear the arrears.

He said that the executive board of the IMF considered evidence in a letter from a report from the Managing Director of the IMF, laying out the parameters and the circumstances under which that underreporting took place.

He said that the reporting was related to the stock of central government expenditure arrears, and “the board took into consideration the circumstances under which it happened, the authority’s explanation and subsequent corrective actions that were associated with that,” he added.

Accordingly, a significant portion of the missing data was related to the legacy interest subsidy scheme for senior citizens that expired in 2022, as well as other liabilities that were disclosed in separate Finance Ministry reports, but not reported to the IMF in the required format.

“We engaged with the authorities at great length, clearly and openly, and we have reached an agreement on understanding the circumstances under which this underreporting took place,” Papageorgiou said.

He stressed that the IMF has been given assurances by the Sri Lankan government that there are corrective actions in place, which include proper reporting, proper commitment control in preventing similar errors from taking place in the future, as well as clearing these arrears within a period of two years.