IMF advises Sri Lanka to tighten monetary policy to overcome debt crisis

An International Monetary Fund (IMF) official on Tuesday advised Sri Lanka to tighten monetary policy, raise taxes and adopt flexible exchange rates to overcome its debt crisis, according to a news report. “We had very good and fruitful technical discussions on the preparations for the negotiations with the authorities over the past weekend and a few days before,” quoted Anne-Marie Gulde-Wolf, acting director of the Asia and Pacific department of the IMF, quoted by Xinhua. as said at an online event.

“The fund lending requirement will be a step towards debt sustainability. Monetary policy needs to be tightened to contain inflation. We see a need for flexible exchange rates,” she added. However, the IMF official refrained from commenting on the value of any IMF package, or an estimate of the time needed to reach a deal with the island nation.

This comes as Sri Lankan Finance Minister Ali Sabry and Central Bank Governor Nandalal Weerasinghe recently concluded a visit to the IMF to discuss financial assistance to the country. The island nation has been in the throes of an economic crisis, considered the worst since the country’s independence in 1948. Due to power shortages, parts of Sri Lanka are experiencing power cuts. Sri Lanka’s external debt is estimated at $51 billion.

Sri Lanka appears to be on the brink of a “humanitarian crisis”, according to the United Nations Development Programme, as its financial problems worsen, with rising food prices, and the country’s coffers dry up. According to World Bank estimates, five million people in Sri Lanka have fallen below the poverty line since the start of the crisis. (ANI)

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