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Wednesday, February 28, 2024

Disaster-ridden Sri Lanka’s financial reforms are yielding outcomes, however challenges stay, IMF says

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COLOMBO, Sri Lanka — Debt-stricken Sri Lanka’s financial reform program is yielding the primary indicators of restoration, however the enhancements nonetheless must translate into improved residing circumstances for its individuals, the Worldwide Financial Fund stated Friday.

Sri Lanka has been fighting an financial disaster since declaring chapter in April 2022 with greater than $83 billion in debt, greater than half of it to overseas collectors.

The disaster precipitated extreme shortages of food, gasoline and different requirements. Strident public protests led to the ouster of then-President Gotabaya Rajapaksa. The IMF agreed final March to a $2.9 billion bailout package deal, and launched the primary fee shortly thereafter and the second tranche final month.

The IMF stated Sri Lanka’s actual GDP grew by 1.6% within the third quarter of 2023, the primary enlargement in six consecutive quarters. Shortages of necessities have eased, inflation stays contained and the nation’s exterior reserves elevated by $2.5 billion in 2023, it stated.

“The financial reform program applied by the Sri Lankan authorities is yielding the primary indicators of restoration,” stated Pete Breuer, the IMF’s senior mission chief for Sri Lanka.

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Breuer led a group of IMF officers who visited Sri Lanka and met with officers to debate progress in implementing the financial and monetary insurance policies below the bailout package deal.

“Nonetheless, challenges stay as these enhancements must translate into improved residing circumstances for Sri Lanka’s individuals,” Breuer advised reporters on the finish of his go to. “Sustaining the reform momentum and making certain well timed implementation of all program commitments are essential to rebuilding confidence and placing the restoration on a agency footing that may profit all individuals.”

He careworn that tax coverage measures should be accompanied by strengthened tax administration, the removing of exemptions and discount of tax evasion to make the reforms extra sustainable and construct confidence amongst collectors to assist Sri Lanka’s efforts to regain debt sustainability.

Sri Lanka is hoping to restructure $17 billion of its excellent debt and has already reached agreements with a few of its exterior collectors.

Extreme shortages of meals, gasoline and medication have largely abated over the previous yr and authorities have restored energy provide. However public dissatisfaction has grown over the federal government’s effort to extend income by elevating electrical energy payments and imposing heavy new earnings taxes on professionals and companies.

Early this month, the federal government raised the worth added tax and prolonged it to cowl necessities akin to gasoline, cellphones, cooking fuel and medicines.

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