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Upcoming elections: IMF warns recovery at risk without continued reforms

Upcoming elections: IMF warns recovery at risk without continued reforms

25 Aug 2024 | By Madhusha Thavapalakumar


  • IMF emphasises importance of safeguarding recent economic gains
  • Notes Sri Lanka must persevere with reforms to ensure stable growth
  • Upcoming election sparks debate over IMF agreement’s future


The International Monetary Fund (IMF) has stressed the need to safeguard ‘hard-won’ gains amid the ongoing election cycle, given that Sri Lanka’s economic recovery remains vulnerable despite progress. 

Speaking to The Sunday Morning Business, an IMF spokesperson said: “Sri Lanka has made good progress in terms of getting the recovery going, but the country is not out of the woods yet.”

Therefore, the IMF urged the Government to continue with the critical reforms necessary to stabilise the economy and avoid slipping back into a crisis. 

“As for the upcoming Presidential Election, it is for the people of Sri Lanka to decide on the outcome. Achieving the programme’s objectives is a key priority to give Sri Lanka a chance to emerge from one of the worst crises in its history,” the spokesperson said.

Opposition Leader and presidential candidate Sajith Premadasa has been reiterating his intention to amend the current IMF agreement if elected, arguing that it does not adequately focus on economic growth. 

Premadasa has criticised the projected 3.1% economic growth by 2029 as insufficient, calling for a focus on “tradable growth” and shared prosperity.

Similarly, National People’s Power (NPP) Leader and presidential candidate Anura Kumara Dissanayake has indicated that while his government would not immediately withdraw from the IMF agreement, it would seek to amend certain clauses to ease the economic burden on the public. 

Whichever candidate comes to power in the Presidential Election will have to discuss the timing of the third review of Sri Lanka’s Extended Fund Facility (EFF) with the IMF. However, the election period has already sparked a political debate over the future of the IMF agreement.

During the visit of IMF staff to Colombo on 2 August, they acknowledged the Sri Lankan authorities’ commendable progress in putting the country’s debt on a sustainable path. However, they emphasised that the nation was still in a fragile state. 

The execution of domestic debt restructuring and finalising agreements with key creditors like the Official Creditor Committee and the Export-Import (Exim) Bank of China have been identified as major milestones. Yet, IMF staff has made it clear that a swift resolution of remaining steps is critical to regaining investor confidence.

Sri Lanka entered into the IMF agreement during one of the worst crises in its history, driven by severe economic instability. The programme, which includes debt restructuring and stringent fiscal reforms, was designed to restore macroeconomic stability and lay the foundation for sustained growth, but has been met with severe opposition from several political parties.



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