Sri Lanka's Economic Future Hinges on Tax Fairness - IMF

COLOMBO (News 1st); The International Monetary Fund (IMF) stressed on the critical need for Sri Lanka to restore fiscal and debt sustainability in order to overcome its ongoing economic crisis.

Julie Kozack, Director of the IMF’s Communications Department, highlighted the importance of these measures in response to a question posted by News 1st's Zulfick Farzan, emphasizing the complex policy trade-offs the country faces.

"On the other question on salaries, and the program protecting the poor. As I said in the beginning, we do understand, and it is very important to recognize how difficult this situation in Sri Lanka has been, over the past few years. They've been very challenging for the people of Sri Lanka and the country does continue to face some very complex policy trade-offs. This is particularly the case when it comes to debt, and the fiscal position. Both of those situations do remain in challenging territory," Kozack stated.

She further elaborated that restoring fiscal and debt sustainability is essential not only for the Sri Lankan economy to emerge from its current crisis but also to prevent a recurrence of the severe economic conditions faced in 2022. "They are also essential to lay the foundation for robust and sustainable growth, and job creation," she added.

Addressing the government's need for resources to meet its financial obligations, Kozack stressed the importance of an equitable tax system.

"The government does need to have the resources in order to pay its bills. That means ensuring that taxes are paid by those who can most afford to pay them, and that is a key priority in Sri Lanka. Efforts in this direction include improving tax administration, limiting the size of tax exemptions, that have been granted in the past," she explained.

Kozack also emphasized that the IMF's program for Sri Lanka includes measures to protect the poor and vulnerable. "The program includes measure to protect the poor and the vulnerable. It has a strong focus on anti corruption and good governance, to mitigate the impact of the reforms on vulnerable segments of society and also to ensure that the hard won gains from the reform efforts ultimately benefit all the people of Sri Lanka," she concluded.