Economy shows signs of improvement but recovery remains a challenge: IMF DMD

• Says now, more than ever, it is essential to continue reform momentum, under strong ownership by authorities and citizens
• Asserts continued open dialogue with creditors will help to reach restructuring agreements to restore debt sustainability
• Emphasises that safeguarding financial sector stability is of utmost importance
• Stresses need to protect poor and most vulnerable that have been disproportionately affected by crisis 
• Says looks forward to continued partnership through EFF-supported economic programme

Sri Lanka’s economy is showing tentative signs of improvement, due to the implementation of critical policy actions, acknowledged visiting senior International Monetary Fund (IMF) official but noted recovery remains challenging.

IMF Deputy Managing Director (DMD) Kenji Okamura, who concluded his observation visit to the island nation on Thursday, asserted that now, more than ever, it is essential to continue the reform momentum, under strong ownership by both the authorities and Sri Lankan people.

“The current economic crisis has its genesis in policy missteps aggravated by external shocks. Continued open dialogue with the creditors will help to reach restructuring agreements to restore debt sustainability, in line with the 
programme targets.

Undoubtedly, safeguarding the stability of the financial sector is of utmost importance in this process,” said Okamura in a statement.

He went on to assert that as Sri Lanka navigates its way through the economic crisis, it remains imperative to protect the poor and most vulnerable that have been disproportionately affected by the crisis. 

“I was heartened to see that the authorities have stepped up efforts to increase public spending on social safety nets while improving targeting and coverage for those who need it,” he noted.

The IMF official was in Sri Lanka on a two-day visit, starting May 31. During the visit he met with President Ranil Wickremesinghe, Central Bank Governor Dr. Nandalal Weerasinghe, Speaker Mahinda Yapa Abeywardana and Foreign Affairs Minister Ali Sabry, among other government ministers and representatives.

Discussions were held on the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability. In the meeting with the parliamentarians, discussions revolved around the importance of strengthening governance, a central pillar of the IMF programme. 

“The hard-won gains of Sri Lankan people who have relentlessly supported the reform effort can only be safeguarded by good governance,” Okamura pointed out.

He also visited the dock yard, port terminal and Port City, where he shared he was impressed to see continued economic activity. 

“I underscored the importance of decisive implementation of structural reforms, which can attract investment and boost growth,” he added.

Concluding his message, Okamura appreciated the excellent, long-standing relations between Sri Lanka and the IMF and looks forward to continuing the partnership through the Extended Fund Facility (EFF)-supported economic programme. 

“I will leave Colombo with fond memories of the country and its welcoming people,” he said in closing.