1. On behalf of our Sri Lankan authorities, we would like to thank staff for candid discussions and the comprehensive and balanced assessment of the macroeconomic developments and outlook of the Sri Lankan economy under the third Post-Program Monitoring (PPM).
2. The discussions were held in Sri Lanka just after a few weeks of the presidential election held in January 2015, which led to the formation of a new Government. The new administration has placed special emphasis on the implementation of projects identified under its 100-day program, which included far reaching constitutional, institutional and social welfare reforms aimed at strengthening good governance and transparency, promoting equity and reducing poverty. The much awaited constitutional reforms are mainly focused on transferring certain executive powers currently held by the President to the Parliament and establishment of independent judiciary, police, election, public service and anti-corruption commissions. These constitutional amendments have already been forwarded to the Parliament. Although the government formed after the Presidential election has no clear majority in the Parliament, many members are likely to support constitutional reforms irrespective of political differences. The Government is also planning to call for a Parliamentary election early to ensure political stability. This will enable the new government to come up with a firm medium term macroeconomic policy framework to spur growth, strengthen stability and to address emerging imbalances in certain sectors of the economy. Therefore, our authorities share the staff’s view that as a firm medium term policy agenda of the new government will be available only after the Parliamentary elections, the medium term analysis presented in the report is incomplete.
3. The SBA supported program, which was successfully completed in 2012, helped Sri Lanka to strengthen its macroeconomic stability and build policy space. Our authorities broadly agree with the thrust of the staff assessment and stand ready to continue the close engagement with the Fund and have indicated their willingness to continue with the PPM, though technically it is not necessary, as outstanding borrowings from the Fund have now fallen below the threshold level that generally calls for PPM.