No Room for Policy Errors in Sri Lanka's Recovery, Warns IMF

by Zulfick Farzan 04-03-2025 | 10:48 AM

COLOMBO (News 1st); The International Monetary Fund has highlighted the critical need to maintain the momentum of reforms to ensure macroeconomic stability, debt sustainability, and long-term inclusive growth.

IMF Senior Mission Chief for Sri Lanka, Peter Breuer, stressed that there is no room for policy errors and emphasized the importance of sustained revenue mobilization to restore fiscal sustainability and ensure the government can continue to provide essential services.

Breuer pointed out that boosting tax compliance and refraining from exemptions are key to maintaining support for economic reforms.

He also underscored the necessity of meeting social spending targets and continuing reforms of the social safety net to ease economic hardship and ensure the poor and vulnerable can participate in Sri Lanka's recovery. According to Breuer, social support needs to be well-targeted towards the most disadvantaged to promote inclusive growth within limited fiscal space.

"Let me also emphasise that to ease economic hardship and ensure the poor and vulnerable can participate in Sri Lanka's recovery, it is important to meet social spending targets and continue with reforms of the social safety net. Going forward, social support needs to be well targeted towards the most disadvantaged so as to promote inclusive growth with limited fiscal space. Restoring cost recovery electricity pricing without delay is needed to contain fiscal risks from state-owned enterprises," he explained to reporters from Washington DC, on Tuesday (4).

He further noted that restoring cost recovery electricity pricing without delay is essential to contain fiscal risks from state-owned enterprises.

In the financial sector, resolving non-performing loans, strengthening governance and oversight of state-owned banks, and improving insolvency and resolution frameworks are important priorities to revive credit growth and support economic recovery.

Breuer emphasized the need to address prolonged structural challenges to unlock Sri Lanka's long-term potential, including the steadfast implementation of governance reforms.