IMF: Lanka must continue reforms amid global uncertainty

The International Monetary Fund on Friday (11) said that the recent external shock and evolving developments are creating uncertainty for the Sri Lankan economy, which is still recovering from its own economic crisis.

IMF Mission Chief For Sri Lanka,  Evan Papageorgiou in a statement said that more time is needed to assess the impact of the global shock and how its implications for Sri Lanka can be addressed within the contours of its IMF-supported program.

“The government’s sustained commitment to program objectives is ensuring policy continuity and program implementation remains strong. Going forward, sustaining the reform momentum is critical to safeguard the hard-won gains of the program and put the economy on a path toward lasting macroeconomic stability and higher inclusive growth,” he added.

He warned that against increased global uncertainty, sustained revenue mobilization efforts and prudent budget execution in line with Budget 2025 are critical to preserve the limited fiscal space.

“Boosting tax compliance, including by reinstating an efficient and timely VAT refund mechanism, will help contribute to revenue gains without resorting to additional tax policy measures. Avoiding new tax exemptions will help reduce fiscal revenue leakages, corruption risks and build much needed fiscal buffers, including for social spending to support Sri Lanka’s most vulnerable. Restoring cost recovery in electricity pricing will help minimize fiscal risks arising from the electricity state-owned enterprise,” he said.

IMF Mission Chief For Sri Lanka,  Evan Papageorgiou stressed that the Sri Lankan government has an important responsibility to protect the poor and vulnerable at this uncertain time. “It is important to redouble efforts to improve targeting, adequacy, and coverage of social safety nets. Fiscal support needs to be well-targeted, time-bound, and within the existing budget envelope.”

“While inflation remains low, continued monitoring is warranted to ensure sustained price stability and support macroeconomic stability. Against ongoing global uncertainty, it remains important to continue rebuilding external buffers through reserves accumulation,” he added.

“Discussions are ongoing, and the authorities are encouraged to continue to make progress on restoring cost-recovery electricity pricing, strengthening the tax exemptions framework, and other important structural reforms,” said the IMF Mission Chief.

The statement said that the International Monetary Fund (IMF) staff team had very productive discussions with the Sri Lankan authorities on economic performance and policies underpinning the Fourth Review under the IMF Extended Fund Facility (EFF) arrangemenAn IMF team led by Evan Papageorgiou visited Colombo from April 3 to 11, 2025.