By The International Monetary Fund (IMF) has told the Government of Sri Lanka that steps must be taken to reverse the downwards trend of the economy.
The Central Bank has been hesitant to get IMF intervention to handle the public debt that has risen to unsustainable levels, low international reserves, and persistently large financing needs.
The IMF has noted that Sri Lanka’s low tax-to-GDP ratio, income tax, and VAT rates could be increased. Undoubtedly such increases will not be popular as the cost of living has increased within the last few months.
Sri Lanka government authorities are also being encouraged to reform state-owned enterprises and adopt cost-recovery energy pricing.
Delay is costly:
The IMF points out that a tighter monetary policy stance is needed to contain rising inflationary pressures while phasing out the Central Bank’s direct financing of budget deficits. However, the government is faced with Weighing the pros and cons of the impact of IMF regulatory proposals which may have consequences at the political level.
On the other hand, given the current level of scarcity of foreign exchange analysts warn that the delay in requesting IMF assistance may be costly.
The leader of the UNP has repeatedly said that the finance minister needs to be encouraged to hold talks with the IMF.
