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IMF loan to SL will require ‘painful’ treatment’: Dr. Coomaraswamy

25 Jul 2022

  • Cost reflective pricing, revenue enhancement measures, SOE reforms are few requirements
  • Says new Prez has an 'excellent' team around, which includes Nandalal
    By Imesh Ranasinghe The conditions that will be laid out by the International Monetary Fund (IMF) for Sri Lanka will be “very onerous”, stated the former Central Bank of Sri Lanka (CBSL) Governor Dr. Indrajit Coomaraswamy, noting that the depth of the problem Sri Lanka is facing will require painful treatment. Speaking to The Wire last Saturday (23), he said that the IMF will expect Sri Lanka to move to a primary surplus of 2% of GDP by end of the programme in three years, from the current forecasted primary deficit of 4.5-5% of GDP. He noted that achieving such a number would mean a change in about 6% of GDP, which particularly involves revenue enhancement by the current Ranil Wickremesinghe-led Government. Dr. Coomaraswamy also said that the IMF would require the Government to implement cost-reflective pricing in the utilities sectors, especially in the energy sector, and to establish the independence of the CBSL. Moreover, the former Governor said that President Wickremesinghe will have to take tough decisions in terms of implementing structural reforms, such as reforms to State-Owned Enterprises (SOEs) and divestment of their assets, before the economy of the country falls into an abyss. To help the current President, Dr. Coomaraswamy said, there is an excellent team around him, including current CBSL Governor Dr. Nandalal Weerasinghe and Treasury Secretary Mahinda Siriwardena. “Normally, you go for an IMF programme when the economy is overheating and you are trying to stabilise it. But when you go into an IMF programme when the economy is contracting, and you put in all these measures that are designed to compress domestic absorption, you are going to have a serious problem in terms of economic contraction, job losses, loss of income, etc.,” Dr. Coomaraswamy said. Therefore, he noted, President Wickremesinghe will have to take measures to accelerate the growth of the economy, which is expected to shrink by 7.1% in 2022, according to the IMF. He added that the President will have to improve the business climate in the country and establish a roadmap on how the current Government will achieve this, as well as improve the ease of doing business in Sri Lanka and clear out “all kinds of messes” that have increased transaction costs in the economy. Moreover, he said that Sri Lanka should reduce the level of protectionism it maintains in terms of trade and enter into more trade deals with other countries.


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