The inadvertent provision of inaccurate data by Sri Lanka regarding the central government’s expenditure arrears was a key issue addressed during the International Monetary Fund’s (IMF) fourth review of the country’s Extended Fund Facility (EFF) arrangement.
Deputy Managing Director and Acting Chair of the International Monetary Fund (IMF), Kenji Okamura, said the under-reporting of arrears, which affected the first three reviews, also led to noncompliant purchases and a breach of obligations under Article VIII, Section 5 of the IMF’s Articles of Agreement.
The discrepancies stemmed from delayed reporting by line ministries and a misinterpretation of the definition of arrears under the program’s technical memorandum, the IMF said.
“The inaccuracies in information provided to the IMF were inadvertent and arose because of weaknesses in the timely reporting of arrears by line ministries to the Ministry of Finance, as well as a misunderstanding by the authorities of the definition of ‘arrears’ under the Technical Memorandum of Understanding,” he said.
In response, Sri Lankan authorities implemented corrective measures and committed to strengthening public financial management and data verification, he added.
The IMF official said that the Executive Board positively considered the corrective actions, and the fact that arrears repayments will be accommodated within the existing fiscal envelope.
“The Executive Board also positively considered the authorities’ commitment to improving public financial management procedures in line with the new PFM law, to reduce the risk of accruing arrears or inaccurate reporting of information going forward,” he said.
Kenji Okamura further said that given the above, the Executive Board agreed to grant waivers for the nonobservances of the quantitative performance criterion that gave rise to the noncomplying purchases and decided not to require further action in connection with the breach of obligations under Article VIII, Section 5.
The IMF Deputy Managing Director and Acting Chair issued the statement, following the Executive Board’s discussion after the completion of the fourth review under the 48-month Extended Fund Facility (EFF) Arrangement for Sri Lanka.
This allows Sri Lankan authorities to draw about US$350 million and brings the total IMF financial support disbursed so far to about US$1.74 billion.
Full report: https://www.imf.org/en/News/Articles/2025/07/02/pr24235-sri-lanka-imf-executive-board-completes-the-fourth-review-under-the-eff (Newswire)
Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:
“The Executive Board of the International Monetary Fund (IMF) reviewed noncomplying purchases made by Sri Lanka under the 2023 Extended Arrangement under the Extended Fund Facility (“EFF”), as well as a breach of obligations under Article VIII, Section 5. The noncomplying purchases arose as a result of the provision of inaccurate information by the authorities on the stock of expenditure arrears at the first, second, and third reviews under the EFF.
“The inaccuracies in information provided to the IMF were inadvertent and arose because of weaknesses in the timely reporting of arrears by line ministries to the Ministry of Finance, as well as a misunderstanding by the authorities of the definition of “arrears” under the Technical Memorandum of Understanding.
“The Executive Board positively considered the authorities’ corrective actions, the fact that arrears repayments will be accommodated within the existing fiscal envelope, and the authorities’ commitment to improving public financial management procedures in line with the new PFM law, to reduce the risk of accruing arrears or inaccurate reporting of information going forward. In view of the above, the Executive Board agreed to grant waivers for the nonobservances of the quantitative performance criterion that gave rise to the noncomplying purchases and decided not to require further action in connection with the breach of obligations under Article VIII, Section 5.”