IMF Deputy Director Kenji Okamura said the country is emerging from its unprecedented crisis with reforms that include doubling taxes, cutting spending and removing subsidies.
A currency crisis since late 2021 has resulted in massive shortages of food, fuel and medicine, triggering months of protests that toppled former President Gotabaya Rajapaksa in July.
“The current economic crisis was born out of policy mistakes exacerbated by external shocks,” Okamura said in a statement Friday after meeting with President Ranil Wickremesinghe and other leaders on Wednesday.
“We discussed the importance of fiscal measures, especially revenue measures, to restore macroeconomic stability,” he added.
Sri Lanka defaulted on its $46 billion external debt in April last year and is still negotiating repayment with its bilateral and private creditors.
“The economic recovery is still difficult,” Okamura said.
“Now, more than ever, it is essential that the reform momentum continues under the strong oversight of the Sri Lankan authorities and people,” he added.
In an address to the nation on Thursday evening, Wickremesinghe pledged to pursue the restructuring of loss-making state enterprises despite resistance from unions.
He said, “Rebuilding a bankrupt country is something that can only be achieved by following traditional methods. We need to adopt a new approach and move forward on a new path of transformation.
He pointed out that the official oil company, the one responsible for the electricity service, and the national carrier (SriLankan Airlines) suffered losses of more than 1.32 billion dollars in 2021, putting a huge burden on the 22 million people. inhabitants of the island.
Wickremesinghe’s government received a $2.9 billion bailout from the International Monetary Fund in March as part of a 48-month program that forces Colombo to implement aggressive reforms.
And the restructuring of external debts has been delayed due to the reluctance of the country’s main bilateral creditor – China – to reduce outstanding debts, preferring instead to offer new loans to Sri Lanka to repay old debts.
Bilateral debts to foreign governments represent just over $14 billion of total external debt, 52% of which is owed to China.
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