The International Monetary Fund (IMF) has emphasized that any fiscal assistance measures implemented by Sri Lanka in response to rising global commodity and fuel prices should be meticulously planned, temporary, and specifically aimed at assisting vulnerable populations.
During a press conference held in Colombo on the 23rd of this month, Evan Papageorgiou, the IMF Mission Chief for Sri Lanka, addressed inquiries regarding the government’s intentions to expand subsidy support and mitigate further price hikes.
Papageorgiou noted that the ongoing conflict in the Middle East, along with the surge in commodity and fuel prices, provided a crucial backdrop for the discussions conducted during the recent IMF delegation’s visit to Sri Lanka.
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He mentioned that discussions with Sri Lankan officials were still in progress, preventing him from providing details on specific measures or figures currently under consideration.
Recalling the government’s introduction of a temporary financial package of approximately Rs. 100 billion following the onset of the Middle East conflict in March and April, Papageorgiou stated that this package was integrated into the fifth and sixth reviews of the IMF-supported program.
This package encompassed both targeted and non-targeted subsidies, cash transfers, and assistance related to increases in fertilizer and electricity prices.
He indicated that this experience serves as a valuable reference for the IMF’s ongoing discussions regarding similar measures in light of the current external economic pressures.
“The primary objectives remain unchanged,” Papageorgiou reiterated, highlighting that fiscal support must be carefully evaluated for cost, limited in duration, and, whenever feasible, accurately directed towards those who are most disadvantaged.
He also stressed that such assistance should be provided in conjunction with efforts to protect the nation’s fiscal reserves.
Regarding Sri Lanka’s foreign exchange reserves, Papageorgiou reported that there has been a steady accumulation of reserves during July and August.
He affirmed that the Central Bank of Sri Lanka is dedicated to meeting the reserve accumulation targets established in collaboration with the IMF.
Referring to the latest program documents released by the IMF, Papageorgiou explained that these documents outline the targets the Central Bank is striving to achieve.
He expressed satisfaction with the Central Bank’s progress in reserve accumulation, underscoring the significance of strengthening external financial buffers. “We are pleased with the positive trajectory,” Papageorgiou concluded.
