COLOMBO: Cash-strapped Sri Lanka’s economy showed “tentative signs of improvement” but recovery remains challenging and Colombo must pursue painful reforms, the IMF said on Friday.

The International Monetary Fund’s Deputy Managing Director Kenji Okamura said the country was emerging from its unprecedented crisis thanks to reforms including the doubling of taxes, spending cuts and the scrapping of subsidies.

A currency crisis since late 2021 led to severe shortages of food, fuel and medicines and triggered months of protests that led to the toppling of former president Gotabaya Rajapaksa in July.

“The current economic crisis has its genesis in policy missteps aggravated by external shocks,” Okamura said in a statement Friday, after meeting President Ranil Wickremesinghe and other leaders on Wednesday.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability.”

Sri Lanka defaulted on its $46 billion external debt in April last year, and is still negotiating with its bilateral and private creditors on repayments.

“The economic recovery remains challenging,” Okamura added.

Published in Dawn, June 3rd, 2023