The Civil Society Initiative on Anti-Corruption Reform for Economic Recovery comprising Transparency International Sri Lanka (TISL), Verité Research, the Centre for Policy Alternatives (CPA), Sarvodaya, People’s Action for Free and Fair Elections (PAFFREL) and the National Peace Council (NPC) (the CSI Core Group) notes the news that the Executive Board of the International Monetary Fund (IMF) last week concluded the first review of the 48-month EFF-supported program for Sri Lanka, and confirmed that Sri Lanka will have access to SDR 254 million (about US$330 million).

The CSI Core Group reiterates its view that governance and anti-corruption priorities that have been highlighted by CSOs in Sri Lanka as well as the IMF in their respective governance diagnostics, are a necessary foundation for economic recovery in Sri Lanka. Not giving adequate priority to these actions is likely to set Sri Lanka up for a second round of debt crisis in the next five years.

The CSOs welcome the IMF’s focus on promoting governance reforms within Sri Lanka’s program. However, they note with concern that the government has failed to implement basic commitments around transparency and anti-corruption that are mentioned in the current program. For example, the program expected the government to publish by the end of March 2023 on an online platform, relevant information on large-scale public procurement contracts and those receiving tax exemptions through various laws. The government has failed to do so to date. As noted in the IMF documents as well, the government is still significantly slow and incomplete in operationalizing and adequately structuring the expected anti-corruption initiatives including implementation of the new Anti-Corruption Act. The IMF has now reclassified some of these actions as Structural Benchmarks.

By these failures, the government has signaled that it will under-deliver or renege on anti-corruption commitments if there is space within the program to do so. The IMF by classifying commitments as “Prior Actions” (PAs) or as “Structural Benchmarks” (SBs) can signal very serious concern. While several of the failed governance-related actions have been reclassified as SBs, the opportunity to signal urgency by classifying them as PAs has been missed, even when actions were overdue by over 6 months.

As the government continues to make momentous decisions on behalf of the people of Sri Lanka, the CSI Core Group calls upon the government to rethink its recalcitrant approach to the anti-corruption reform agenda, and the IMF to consider the consequences of the signaling effect of not classifying failed actions as PAs in the renewal of the current program, and not categorizing all significant anti-corruption actions as SBs.

The CSI Core Group welcomes the Governance Diagnostic Assessment published by the IMF and the IMF commitment to ensure that identified actions will be fully included within the program in the future. While acknowledging that limited movement has been made on governance reform, the CSI Core Group calls upon the Government to show good faith progress on the same as the representatives of the people, without being guided merely by external demand.