Amid Economic Crisis, IMF Urges Sri Lanka To Increase Taxes For Addressing Debt Woes

Amid the worsening economic crisis and neck-deep debt, Sri Lanka has been urged by the International Monetary Fund (IMF) to tighten monetary policy, raise taxes and adopt flexible exchange rates, as per a report in Reuters.

The island nation of 22 million people has requested loans from the IMF as it struggles to pay for imports amid piling debt and a sharp drop in foreign exchange reserves that have fueled soaring inflation.

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What The IMF Said

"We've had very good, fruitful, technical discussions on preparations for the negotiations with authorities over the past weekend and a couple of days before," said Anne-Marie Gulde-Wolf, acting director of the IMF's Asia and Pacific Department, speaking at an online news conference, as per Reuters.

Last week, Sri Lanka's Finance Minister Ali Sabry was in Washington to talk to the IMF, the World Bank, India and others about financing help for his country, which has already announced a default on payments on portions of its $51 billion in external debt.

"The requirement for fund lending will be progress toward debt sustainability," Anne-Marie Gulde-Wolf reportedly said. She called on Sri Lanka for measures to increase tax revenues to address critical spending needs, as per Reuter's report.

"Monetary policy has to be tightened to keep inflation in check," she said. "We see a need for flexible exchange rates."

But amidst the soaring inflation during the economic crisis, which has already made fuel, food, medicines etc out of a lot of Sri Lankans¡¯ reach, it remains to be seen if and how the govt takes up the implementation of IMF¡¯s suggestions, especially regarding tax increase.

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