Sri Lanka must tighten policy, raise tax to address its debt trouble – IMF

April 26, 2022 at 9:47 AM

The International Monetary Fund (IMF) has urged Sri Lanka to tighten monetary policy measures and raise taxes to address its debt woes.

According to Reuters, Acting Director of IMF’s Asia & Pacific Department Anne Marie Gulde said Sri Lanka must tighten monetary policy, raise tax & adopt flexible exchange rates to address its debt crisis. 

She also said fruitful technical discussions were held on preparations for the negotiations with authorities over the past weekend.

Sri Lanka with a population of 22 million people has requested loans from the IMF as it struggles to pay for imports amid crushing debt and a sharp drop in foreign exchange reserves that have fueled soaring inflation.

“We’ve had very good, fruitful, technical discussions on preparations for the negotiations with authorities over the past weekend and a couple of days before,” said Anne-Marie Gulde-Wolf, speaking at an online news conference.

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, which has suspended payments on portions of its $51 billion in external debt.

“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.

“Monetary policy has to be tightened to keep inflation in check,” she said. “We see a need for flexible exchange rates.”

Gulde-Wolf 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. (NewsWire)