IMF says Sri Lanka debt repayment risks remain high despite a US$695 million release, urging reforms, revenue gains, and stability.
The IMF has warned that Sri Lanka still faces a high level of debt repayment risk, even as the International Monetary Fund released US$ 695 million to the country under its latest review.
According to the latest IMF report, Sri Lanka’s debt repayment capacity, or debt sustainability, continues to remain at a high-risk level despite progress made under the programme. The report also outlines further prior actions that Sri Lanka must complete as part of its reform commitments.
The IMF states that Sri Lanka must increase its capacity to achieve stronger economic growth potential. To reach that goal, the report says the country needs systematically implemented structural reforms, along with modernized public infrastructure capable of supporting long-term recovery.
Kenji Okamura, Deputy Managing Director and Acting Chair of the IMF, said programme performance had generally remained strong, but further work was still needed.
“While programme performance has generally been strong, efforts are needed to complete reforms in public financial and investment management and the electricity sector. Continuing to improve government revenue collection to make the tax system more efficient and enhance growth is essential, and this should be done through the formulation of a medium-term revenue strategy. Debt restructuring is nearing completion, but risks to debt sustainability remain high.
Monetary policy should be maintained while prioritizing price stability. Enhancing exchange rate flexibility and gradually phasing out balance of payments measures are critical for rebuilding external sector safeguards and resilience.”
