Sri Lanka better positioned to support vulnerable amid energy risks – IMF

Sri Lanka has strengthened its fiscal position over the past three years, placing it in a better position to support vulnerable groups affected by global energy shocks, according to the IMF’s Asia and Pacific Director, Krishna Srinivasan.

Responding to a question raised by a journalist regarding Sri Lanka’s recovery in terms of protecting and supporting the poor and vulnerable, in the context of its high debt levels, ongoing sovereign debt restructuring, and risks posed by the Middle East situation, he said the country remains vulnerable due to its reliance on energy imports such as oil and gas.

However, he noted that over the past three years, Sri Lanka has made significant progress under its IMF-supported programme by increasing tax revenue as a share of Gross Domestic Product (GDP) and gradually building fiscal buffers.

“Over the last three years, they have slowly built up buffers on the fiscal side. Their revenue as a share of GDP has doubled from the bottom of the crisis to where we are today. So they are in a better position than they were before to provide targeted fiscal support,” he said. 

He added that these improvements enable the country to provide targeted and temporary support to those impacted by rising energy costs, provided the available resources are used efficiently.

Srinivasan emphasized that maintaining fiscal discipline and continuing economic reforms are essential to ensuring sustainable, inclusive, and balanced growth, while avoiding any setbacks that could undermine the country’s recovery.