Everyone must come together to support the recovery and promote stableand inclusive growth to tackle the enormous economic challenge that Sri Lanka is facing, said the Internationl Monetary Fund's senior mission chief for Sri Lanka Peter Breuer.
In a video on the IMF YouTube channel, he said that after years of increasing economic problems and policy mistakes, Sri Lanka has committed to report and rebuild.
“The IMF is here to help. The fund has approved about USD 3 billion over the next four years to support Sri Lanka in this time of need”, he said.
Since 2019, significant tax cuts and delays in anticipated reforms have left the country entering the pandemic with thin currency reserves, high debt levels and no fiscal space to buffer against shocks.
“With no reserves left, power cuts, shortages of food and medicines, and long lines for petrol emerged. Sri Lanka defaulted on its debt for the first time in its history. There are no easy solutions, but that’s where everyone must come together to tackle this enormous problem”, Breuer said.
Sri Lankans must make efforts to continue their way out of the crisis while supporting the less fortunate, highlighting that the global community must support Sri Lanka in this effort so that it can once again be on a path of strong and inclusive growth. Sri Lankan authorities have put together an ambitious economic recovery program, including reforms to raise the government revenue, stabilize prices, build up foreign reserves and safeguard financial stability, brewer said.
They are also asking their creditors to support their efforts by granting debt relief. “When a crisis strikes, the poor are hit hardest. The program aims to raise spending for the poor and vulnerable, strengthen social safety nets and introduce progressive tax reforms to ensure greater contributions come from high-income earners”, he said.
Breuer highlighted that with breathing room from external debt relief, the IMF expects Sri Lanka’s economy to gradually start to recover and expand.
“It’s critical to ensure the hard-won gains from the reforms benefit the Sri Lankan people, and the crisis will not repeat itself”, he said.
Authorities have committed to improving public financial management and strengthening the anti-corruption legal framework, he said, adding the IMF will assess governance and corruption vulnerabilities and provide recommendations.
“We, at the IMF look forward to working closely with the people of Sri Lanka for a brighter future for all.”