ECONOMYNEXT – Sri Lanka’s cabinet has approved reforms to the governance of state-owned banks which is required under a program with the International Monetary Fund, Minister Bandula Gunawardana said.
The reforms were identified by a committee made up of representative of the IMF, World Bank and Central Bank of Sri Lanka, Gunawardana told reporters Tuesday.
The changes relate to addressing weaknesses in governance, risk management and supervision of banks, he said.
The reforms are tied to a structural benchmark of the IMF program and prior actions of a World Bank development policy operation (budget support loans) has to be completed quickly, he said.
Sri Lanka struck a staff level agreement following mission who conducted the second review with final board approval after some prior actions have to be concluded.
The World Bank gives budget support loans only after the completion of prior actions.
State banks had got into difficulties during the crises, especially in financing state owned enterprises and the budget through overdrafts, usually refinanced by central bank liquidity windows.
Some of the actions have been referred to as the ‘sovereign -bank’ nexus.
(Colombo/April08/2024)