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IMF urges Lanka to tighten monetary policy,raise tax to address debt woes

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The International Monetary Board (IMF) has urged Sri Lanka to tighten monetary policy and raise tax to address the debt crisis.

Speaking to Wire Servicers, Acting Director of IMF’s Asia & Pacific Department Anne Marie Gulde said, “Monetary policy has to be tightened to keep inflation in check. We see a need for flexible exchange rates. The requirement for fund lending will be progress toward debt sustainability,” Gulde-Wolf said, calling on Sri Lanka for measures to increase tax revenues to address critical spending needs.

“As you know, there is high public debt, so market confidence is a critical element. Structural reforms are ongoing. They need to focus on trade opening, SOE reforms, and increasing competitiveness.”

Gulde-Wolf however did not reply to a question on the total value for any IMF package, nor the estimated timing of a conclusion to the negotiations with Sri Lanka. Responding to the issue of labour, Gulde-Wolf said that unemployment in Sri Lanka is low, but in the forward-looking policies of competitiveness and looking at an ageing population, labor reforms are essential.

“One of them that I would stress is to increase the participation rate of women also, which is very low in Sri Lanka. We need to make sure that the authorities continue to pursue a prudent policy mix in the run up with sustained revenue-based fiscal consolidation and adequate vigilant monetary policy and continuing efforts to build reserves.”

Sri Lankan Finance Minister Ali Sabry was in Washington last week to talk to the IMF, the World Bank, India and others about financing help for his country. Subsequently the IMF team welcomed the authorities’ plan forwarded by Sri Lanka to engage in a collaborative dialogue with their creditors.

“Going forward, the IMF team will support Sri Lanka’s efforts to overcome the current economic crisis by working closely with the authorities on their economic program, and by engaging with all other stakeholders in support of a timely resolution of the crisis,” Managing Director IMF Kristalina Georgieva said.


Wednesday, April 27, 2022 – 01:00

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