The International Monetary Fund (IMF) Executive Board has reviewed Sri Lanka’s inadvertent provision of inaccurate data regarding the central government’s stock of expenditure arrears, following concerns over noncompliance with the Fund’s reporting obligations.
According to an official IMF statement, the discrepancies stemmed from weaknesses in timely reporting by line ministries to the Ministry of Finance and a misunderstanding of the definition of “arrears” as outlined in the Technical Memorandum of Understanding under the country’s Extended Fund Facility (EFF) program.
A detailed review of budget line appropriations revealed under-reporting of the government’s arrears stock, resulting in non-complying purchases and a breach of obligations under Article VIII, Section 5 of the IMF Articles of Agreement.
However, the IMF acknowledged that the inaccuracies were not deliberate and praised the Sri Lankan authorities for cooperating fully with IMF staff, providing corrected data, and taking concrete steps to prevent future reporting errors.
Corrective measures include accommodating arrears repayments within the current fiscal envelope and committing to enhanced financial reporting in line with the new Public Financial Management (PFM) law.
In a statement, IMF Deputy Managing Director and Acting Chair Kenji Okamura said the Executive Board took a positive view of Sri Lanka’s response.
“The Executive Board agreed to grant waivers for the nonobservances of the quantitative performance criterion and decided not to require further action regarding the breach of obligations under Article VIII, Section 5,” he said.
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