Business
IMF Mission disagrees with widespread notion of ‘IMF-imposed fiscal consolidation for Sri Lanka’
By Sanath Nanayakkare
The International Monetary Fund (IMF) mission led by Peter Breuer and Masahiro Nozaki that conducted a staff visit to Colombo from May 11 to 23, 2023 took issue with the widespread notion of ‘IMF-imposed fiscal consolidation measures for Sri Lanka’ at a Newsline TV programme hosted by Sirasa TV on Tuesday.
Disagreeing with a query on whether ‘IMF-imposed’ fiscal consolidation measures made matters worse for Sri Lanka, Peter Breuer said,” I take slight issue with your mention of IMF-imposed fiscal consolidation measures for Sri Lanka because what was the alternative if there weren’t an IMF programme for Sri Lanka and we intervened in the crisis at the request of the government of Sri Lanka,” he said.
“The IMF provides financing to support the government to reduce the amount of money it needs to find in the market which leads to even higher interest rates. Or it needs to get it from the Central Bank which leads to ever-increasing inflation which everyone is already feeling at their purse strings. Or it needs to reduce its expenditure and consolidate on the expenditure side. All three of these options are not desirable options for Sri Lanka. And by providing some financing, the IMF has cushioned the blow this crisis is dealing to Sri Lanka. And at the same time, the IMF programme commits the government to a credible set of reforms that help the country emerge from this crisis in a sustainable way,” he argued.
When a follow-up query was posed at him saying,” So wasn’t it really IMF-imposed.? Didn’t the IMF tell the government if you want our money this is what you have to do. You make the decision if you want to take it or leave it,” to which Peter Breuer replied,” We don’t approach negotiations like that. We engage in a dialogue with the authorities. We listen to the constraints they have because they know about the Sri Lankan economy that we don’t know about. And at such conversations, beneficial solutions emerge with the input of all sides, namely; the IMF, the government of Sri Lanka, other experts and stakeholders whom we consult throughout our missions in Sri Lanka who bring to the table different perspectives and different ideas that matter for the programme.”
Further speaking Peter Breuer said:
“Why is there consolidation in such terrible crisis? Essentially when you are out of buffers, you have no other choice. There is nothing you can turn to get out of the crisis. You have very few options because accessing the capital markets when debt is not sustainable is impossible. So in order to gain back the confidence of the markets to lend to you again and to bridge such a difficult situation you need to take that first step and start restoring fiscal balance,”
“It’s unfortunate that people will only lend to you when things are looking better except for the IMF that is here to help Sri Lanka in the rest of the times .”
Sarwat Jahan
” When things start getting better, when creditworthiness of the country improves, it should then be a lot easier to access markets again to avoid an overly tightening fiscal situation which has harmful impact on the population.”
“There are plenty of examples for successful IMF programmes where countries committed themselves to the reforms that were supported by the IMF. I myself was resident representative in Ireland when they faced a crisis. I recognize the fact that it’s a different economy. But Ireland committed to very strong reforms and was very serious about ownership and implementation. Those were really key parts of the reform programme in Ireland. They stuck to an ‘under promise- over deliver’ reform framework that generated positive surprises. That really helped Ireland regain confidence of the markets and of the people which resulted in progressive outcomes. There are plenty of other examples of successful IMF-supported programmes in the world,” he said.
When asked about the checks and balances of the programme in Sri Lanka, he said,” There are regular reviews that take place twice a year. First review is to take place around September /October 2023 when we come back and formally consult with the authorities, At that point we will see how things are going relative to what has been agreed and there will be another review six months later. We are in constant contact with the authorities. Our resident director’s daily life is about that. We have continuous video conferences with the authorities. And periodically we come for visits that are not tied to the formal reviews, but in a more informal way of catching up with the authorities. That is the purpose of our current visit in Sri Lanka,” he said.
Sarwat Jahan, Resident Representative in Colombo noted that the IMF was there to clarify on what the Fund can do, but more so what Sri Lankans as a nation can do to put the country back on its track.
“This crisis is quite deep. It is a combination of economic crisis and a humanitarian crisis. Sri Lanka had never faced debt sustainability issues before. This is the first time Sri Lanka has announced a moratorium on its debt service. So the situation is actually quite grave and it is going to take quite a bit of effort on all stakeholders to bring Sri Lanka back to its growth potential. So, for Sri Lanka as a whole the main part is to recognize how deep the crisis is and then all Sri Lankans need to contribute to the recovery which means taking ownership of the deep reforms that are needed. These reforms include tax reforms, SOE reforms and structural reforms – things that can help build entities and institutions. In addition to it, ensuring the independence of the Central Bank and dealing with anti-corruption issues will be important. So in my view, Sri Lanka has to take a holistic approach in meeting key commitments under the Fund-supported programme,” she noted.
The latest Purchasing Managers’ Index (PMI) from the Central Bank suggests Sri Lanka’s economy is beginning to find its feet after a severe crisis, revealing tentative signs of hope in factories and business activity. It indicates the deepest economic pain may be over. With prices rising more slowly, families and companies are getting some much-needed relief.
The Island spoke to an independent analyst for an outside perspective. Elaborating on the report, he struck a cautious note: “Yes, the PMI sounds favourable. But no one should think the hard times are completely behind us. The road to recovery is long and full of potholes.”
“While we can hope for slow, steady improvement in coming months, major problems remain,” he continued. “The country’s massive debt is a heavy burden. Staying on track with the IMF programme requires sticking to tough reforms, which won’t be easy. Global economic uncertainty also affects our exports and even other forms of external support.”
“In short, the next phase won’t be a quick boom. It will be a time for careful repair. These small improvements are like young seedlings – they need constant care, sound policy, and continued external support to grow strong. Our task is to turn this shaky stability into a solid foundation for lasting, inclusive growth. The economy is out of emergency care, but full recovery will be a long and patient journey,” he concluded.
When asked if the current political landscape would aid recovery, he pointed to the present stability as a key advantage. “With political stability in place, the path for necessary reforms and recovery should be more navigable now than ever in the past,” he said.
By Sanath Nanayakkare
Sri Lanka Insurance Life Ltd and Sri Lanka Insurance General Ltd inaugurated their business operations for the year 2026 on 1st January at the Sri Lanka Insurance Head Office. The event was graced by the Chairman, Board members, Corporate Management, and staff of SLIC.
Parallel business launches were also conducted at branch level, with branch staff joining the head office proceedings via live stream. The day’s programme commenced with blessings observed from the four major religious faiths, symbolising unity and goodwill for the year ahead
Heralding the dawn of the New Year, SLIC brought together all 142 branches in a cohesive celebration, uniting as one family to light the traditional oil lamp. During the celebrations, the theme for SLICGL for 2026 ‘Leading the market, strengthening every step’ was officially unveiled
Celebrating 64 years of service and expertise, SLIC continues to stand as Sri Lanka’s most respected and trusted name in insurance. Over the decades, the organisation has remained at the forefront of the sector, sustaining industry‑wide growth and equity even through testing times.
The year 2025 brought many meaningful and positive achievements for SLICGL, yet it concluded with significant challenges as the nation faced the aftermath of the devastating Cyclone Ditwah. Rising to the occasion, SLICGL honoured claims and delivered timely relief, offering protection and reassurance to communities impacted by the catastrophe.
SLICGL proudly reflects on a year of remarkable achievements in 2025. The organisation was ranked
Sri Lanka’s highest-rated insurance brand as the only A+ Fitch rated insurer in the country and became the first and only insurer to surpass Rs. 30 billion in Gross Written Premium. SLICGL secured Carbon Neutral Certification, highlighting a commitment to sustainability. SLICL was also recognised as the Most Valuable General Insurance Brand by Brand Finance.
The lifting of the vehicle import ban in January 2025 helped to revitalize the automotive sector and also reaffirmed SLICGL’s role as the nation’s most trusted insurer. Stepping in to protect new vehicle owners, SLICGL strengthened its portfolio, supported national growth, and supported families and businesses to move forward with confidence.
During 2025, SLICGL continued its partnership with the Ministry of Education on the Suraksha Insurance Scheme, a national initiative aimed at securing the health and wellbeing 4.5 million schoolchildren throughout the country. The partnership provides students regardless of background, access to essential insurance coverage, safeguarding health, supporting families, and strengthening the nation’s future.
SLIGL’s mission places customers at the heart of everything it does. The organisation continues in the commitment of meeting and exceeding customer expectations through its expertise and specialised services. Aligning business strategies with this vision, SLIC delivers a superior customer experience through all touchpoints.
The Milk Industries of Lanka Company (MILCO) has recorded the highest profit and sales revenue in its history, driven by strong performance under the flagship Highlands brand, Agriculture Minister Lal Kantha said.
Addressing a Performance Incentive Awards Ceremony held at the MILCO Head Office in Narahenpita on December 31, the Minister said the achievement marked a decisive turnaround for the state-owned dairy enterprise, which had earlier been prepared for divestment.
“When we assumed office, MILCO was being readied for sale. Today, we have been able to rescue it and transform it into a profitable institution,” Minister Lal Kantha said. “By October 2025, the company had generated profits amounting to Rs. 1,490 million, the highest profit ever recorded in MILCO’s history.”
He noted that 2025 has also become the year with the highest sales revenue since the company’s establishment, reflecting improved operational efficiency, renewed consumer confidence and stronger market penetration under the Highlands brand.
The Minister said the government intends to ensure that the gains from the company’s financial recovery are shared across the value chain. “A portion of the profits will be distributed as incentives among dairy farmers,” he said, adding that plans are also in place to provide free life insurance coverage to 15,000 dairy farmers in 2026.
The incentive awards ceremony was organised to recognise employees who played a key role in achieving record sales targets and historic profitability, with senior management highlighting improvements in production planning, supply chain management and farmer engagement.
Minister Lal Kantha paid tribute to the dedication of the MILCO workforce, stating that the turnaround was the result of collective effort.
“This achievement belongs to everyone who worked tirelessly to restore confidence in this institution. I extend my sincere appreciation to all those who contributed to this success,” he said.
MILCO’s performance in 2025 is being viewed as a benchmark for the revival of state-owned enterprises, particularly within Sri Lanka’s agri-based industrial sector.
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