ECONOMYNEXT – The International Monetary Fund (IMF) is willing to listen to alternative views in Sri Lanka’s loan program implementation steps, but the island nation is on a knife edged path and it could slip to a vicious cycle, the global lender’s Mission Head for Sri Lanka said.
The economic reforms under the IMF program have burdened the Sri Lankans with higher taxes, resulting in low disposable income for the public.
With Sri Lanka going for presidential polls later this year, President Ranil Wickremesinghe’s government is likely to slow down the implementation of the IMF reforms, government officials have said.
An IMF mission was in Sri Lanka for the second review of its $3 billion, 4-year loan and met officials from the government, opposition, and civil society organizations.
Peter Breuer, the IMF Senior Mission Chief said they got many proposals during their discussions,
“With respect to the election, yes, we heard many different proposals,” Breuer told reporters in Colombo at the conclusion of the second review of the program.
“For us, what is absolutely key is that the program objectives are achieved. Because, with those, Sri Lanka has a chance of emerging from the crisis. That path is a knife edged path.”
Many political parties including the ruling Sri Lanka Podujana Peramuna (SLPP) want to reduce the tax burden faced by the people.
Higher taxes have made Wickremesinghe’s government unpopular among the voters.
The IMF mission met many groups this time including main opposition Samagi Jana Balawegaya (SJB) and Marxists Janatha Vimukthi Peremuna (JVP) who have promised to renegotiate Sri Lanka’s deal with the IMF.
“KNIFE EDGED”
Breuer, however, warned the country could go back to crisis again if the reforms are not sustained.
“We acknowledge in our press report that the green shoots we see for the economy that’s the beginning of the virtuous cycle and we have to keep it there,” he said.
“It’s knife edged and could easily go back to the vicious cycle and that’s what we want to prevent.”
He said alternative proposals should not deviate from the original goals of the programs including fiscal and economic reforms.
“We are willing to listen to alternative suggestions of how the program objectives can be reached and these must be realistic and achievable within the time frame of the program,” he said.
“The program is the result of robust discussions that we had in the summer of 2022 and since then at the periodic reviews we have been looking at progress under the program.”
“I would argue that it is quite well thought out but of course we are willing to take alternative views. The important part is that the hard won gains of the Sri Lankan people over the past two years are not unravelled.” (Colombo/March 21/2024)
