IMF Deputy MD urges sustained reforms amid Sri Lanka’s recovery from debt crisis
Visiting IMF First Deputy Managing Director Gita Gopinath on Monday commended Sri Lanka’s “impressive progress” following its historic sovereign default but cautioned that the nation must avoid slipping into the familiar past of reform fatigue and economic mismanagement.
Speaking at a high-level conference at the Shangri-La Hotel, Colombo, Dr. Gopinath announced Sri Lanka’s economic recovery, although struggling hard, is still tenuous and depends on the government’s ability to stick to its IMF-supported reform programme.
“This time must be different,” she emphasised, a repetition of the title of her speech. “Out of Sri Lanka’s 16 previous IMF programmes, half were cut short. Hard-won gains were reversed. The country cannot afford to do it again.”
Dr. Gopinath termed Sri Lanka’s 2022 acute crisis—its fuel shortages, hyperinflation, and flattened growth—as a result of decades of fiscal mismanagement, reserve depletion, and unsustainable debt accumulation. To counter it, Sri Lanka committed wide-ranging reforms under an IMF Extended Fund Facility (EFF) which are now paying dividends.
She said that macroeconomic stability has been achieved, inflation has been contained, and GDP went up by 5 per cent for 2024. Fuel and medicine shortages are a thing of the past, and tax revenues are two-thirds higher than GDP. The country’s credit ratings have been improved, and sovereign bonds have become a part of world indices.
Among the recovery efforts was the $25 billion external debt restructuring, of which $3 billion was debt forgiveness. Dr. Gopinath credited the creditor coordination, in particular the Official Creditor Committee effort—co-chaired by France, India, and Japan—with China’s de facto cooperation.
She highlighted Sri Lanka’s experience holds valuable global lessons: debt relief must be context-sensitivity country-adjusted; creditor coordination must be deepened; and domestic debt reprofiling must be managed well for financial and social stability.
Sri Lanka has been urged to maintain reform momentum. She outlined the main issues such as a still-elevated poverty rate (24.5 per cent in 2024), continuing corruption, and domestic debt that remains high.
She said the key is transparency, inclusive policy-making, and engaging all segments of society.
“This is a time to think, question assumptions, and build consensus,” added Dr. Gopinath. “With determination and courage, Sri Lanka can recover stronger and more resilient.”
Dr. Gopinath reiterated the IMF’s backing and echoed President Anura Kumara Dissanayake’s hope that this would be Sri Lanka’s last IMF programme. “Today’s decision is reform or regret,” she cautioned, calling on Sri Lanka to transform its recovery into durable, inclusive growth.
Earlier President Dissanayake had said that he hoped the current IMF bailout would be the last that Sri Lanka would resort to.
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