IMF: Sri Lanka Must Transition from Stabilization to Economic Transformation 📈

The IMF Resident Representative, Dr. Martha Woldemichael, emphasized at the Softlogic Stockbrokers Investor Forum that while recovery is a "success story," it remains fragile and requires sustained reform momentum to improve national living standards. • Economic Performance & Targets Real GDP grew by 5% in 2024 (following a 4.8% average contraction in 2022-2023). Inflation fell to 2.3% YoY as of January 2025; Reserves stood at US$ 6.8 Bn at year-end 2024. Tax Revenue increased significantly from 7.3% of GDP in 2022 to 12.4% in 2024. EFF Program: 4 out of 8 reviews completed with approx. US$ 1.74 Bn disbursed to date. • Key Pillars for Transformation Trade & Investment: Focus on trade liberalization, reducing tariffs, and streamlining customs to integrate into global supply chains. Digitalization: Accelerating digital tools in tax administration and public services to reduce corruption. Labor Market: Reforms to increase flexibility and boost female labor force participation to drive growth. Sector Focus: Strengthening tourism through sustainability and enhancing infrastructure connectivity. • Governance & Stability Emphasis on Central Bank independence, fiscal credibility, and rebuilding buffers to absorb future shocks. Debt restructuring is nearing completion, aiming for long-term sustainability. Social safety nets are prioritized, especially as recent natural disasters have put 10% of the population at risk of poverty.