Economic reforms yield, but challenges remain to improve people’s living conditions

• Swift progress towards the introduction of a progressive property tax is key to ensuring fair burden sharing while sustaining the revenue-based consolidation

The economic reform programme implemented by the Sri Lankan authorities is yielding the first signs of recovery, but challenges remain as these improvements need to translate into improved living conditions for Sri Lanka’s people, the International Monetary Fund (IMF) said.   

An IMF mission team led by Peter Breuer visited Sri Lanka from January 11 to 19, 2024 to discuss recent macroeconomic developments and progress in implementing economic and financial policies under the EFF arrangement.   

The IMF said in a statement after that the real GDP recorded positive growth of 1.6 percent year-on-year in the third quarter of 2023, the first expansion in six consecutive quarters.  

“The economic reform programme implemented by Sri Lankan authorities is yielding the first signs of recovery. Real GDP recorded positive growth of 1.6 percent year-on-year in the third quarter of 2023, the first expansion in six consecutive quarters. Shortages of essentials have eased, and inflation remains contained. Gross international reserves increased by USD 2.5 billion during 2023, and preliminary data point to improved fiscal revenue collections during the fourth quarter of 2023. However, challenges remain as these improvements need to translate into improved living conditions for Sri Lanka’s people.  

“In this context, sustaining the reform momentum and ensuring timely implementation of all programme commitments are critical to rebuilding confidence and putting the recovery on a firm footing that will benefit all people. Swift progress towards the introduction of a progressive property tax is key to ensuring fair burden sharing while sustaining the revenue-based consolidation. Tax policy measures need to be accompanied by strengthening tax administration, removing tax exemptions, and actively eliminating tax evasion to make the reforms more sustainable and to further build confidence among creditors to support Sri Lanka’s efforts to regain debt sustainability.