Sri Lanka is in a stronger position than it was at the height of its 2022 economic crisis to support households hit by rising energy costs, but must stay on its reform path to secure long-term stability, a senior International Monetary Fund official said on Thursday.
Speaking at the IMF Spring Meetings in Washington DC, Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department, said Sri Lanka had made “significant improvement” over the past three years in strengthening its fiscal position, particularly by boosting tax revenue as a share of gross domestic product.
“In the case of Sri Lanka, over the last three years they have made significant improvement in boosting their tax revenue as a share of GDP,” Srinivasan said. “So they have gradually built up fiscal buffers. They are better placed to provide support to the people who have been hurt by this energy shock.”
Sri Lanka’s revenue-to-GDP ratio has roughly doubled from the trough of the crisis, Srinivasan noted, giving the government scope to deliver targeted relief provided it uses the buffers efficiently.
He acknowledged that Sri Lanka shares the exposure common to much of Asia — heavy reliance on imported oil and gas makes the island vulnerable to global energy price shocks. “Like many other countries in Asia, Sri Lanka relies a lot on the import of energy, oil and gas. So they are as vulnerable as other countries in the region. But over the last three years, they have slowly built up buffers on the fiscal side,” he said.
Srinivasan urged Colombo to press on with reforms to “secure inclusive, balanced and strong growth going forward.”
The comments come as the government weighs a Rs.100 billion concessional relief package alongside fiscal targets set under the Extended Fund Facility programme, with a fifth-and-sixth combined review pending at the end of the Spring Meetings.
