(UTV | COLOMBO) – The International Monetary Fund says that due to Sri Lanka’s persistent external debt service burden, international reserves would remain inadequate, despite the authorities’ ongoing efforts to secure FX financing from external sources.
In a statement, the IMF adds that unless the fiscal and balance-of-payments financing needs are met, the country could experience significant contractions in imports and private credit growth, or monetary instability in case of further central bank financing of fiscal deficits.
The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Sri Lanka on February 25, 2022.
The IMF Executive Directors have called for continued improvements to expenditure rationalization, budget formulation and execution, and the fiscal rule.
They also encouraged the authorities to reform state-owned enterprises and adopt cost-recovery energy pricing.
Directors called for renewed efforts on growth-enhancing structural reforms.
They stressed the importance of increasing female labor force participation and reducing youth unemployment. Further efforts are needed to diversify the economy, phase out import restrictions, and improve the business and investment climate in general.
Directors also called for prudent management of the Colombo Port City project and continued efforts to strengthen governance and fight corruption.