The International Monetary Fund is concerned about a shortfall in revenue collection by Sri Lanka’s government this year, though that is unlikely to derail a $2.9 billion loan programme for the crisis-hit country, two Sri Lankan sources told Reuters.

A delegation from the IMF met with Sri Lankan President Ranil Wickremesinghe, who is also the finance minister, and its central bank governor, earlier on Tuesday as part of the first review of the four-year loan deal agreed in March.

Such reviews are necessary to continue the programme, which is critical for the country that is slowly recovering from its worst economic crisis in at least seven decades.

“Sri Lanka has met most of the requirements needed to fulfil the first review. This includes progress on domestic debt restructuring,” said one of the sources, who are both government officials and declined to be named.

“But there were concerns on Sri Lanka’s revenue shortfall for this year. They are likely to conduct further deliberations with Washington and then see how to move forward.”

Sri Lanka’s junior finance minister, Ranjith Siyambalapitiya, told reporters last week that the shortfall could be about 100 billion rupees (about $312 million). The target for the government was to increase revenue to 11.3% of gross domestic product in 2023 from 8.3% last year.

The IMF, Sri Lanka’s central bank and finance ministry did not immediately respond to requests for comment.

The team from the global lender will hold a press conference in Colombo on Wednesday afternoon at the end of its two-week visit to the island nation of 22 million.

Sri Lanka accepted offers to exchange about $10 billion worth of defaulted local debt for new bonds, taking it a step towards meeting debt restructuring requirements ahead of the IMF review.

Sri Lanka has also held multiple rounds of talks with bondholders and bilateral creditors including Japan, China and India to reach an agreement to rework its foreign debt after suspending repayments in May last year.

Source: Reuters

Sri Lanka’s overall macroeconomic and policy environment remains challenging - IMF