The International Monetary Fund (IMF) says any fiscal support measures introduced by Sri Lanka amid elevated global commodity and fuel prices should be carefully costed, temporary and targeted, particularly towards vulnerable groups.

IMF Mission Chief for Sri Lanka Evan Papageorgiou made the remarks at a press briefing in Colombo today (23), responding to a question on the government’s plans to provide further subsidy support and prevent additional price increases.

Papageorgiou said the Middle East conflict and elevated commodity and fuel prices provided the broader context for the discussions held during the IMF team’s latest visit to Sri Lanka.

He said technical discussions with the Sri Lankan authorities were still ongoing and therefore he could not comment on specific measures or numbers under discussion.

Papageorgiou recalled that, following the outbreak of the Middle East conflict in March and April, the government introduced a temporary package of around Rs. 100 billion, which was accommodated under the combined fifth and sixth reviews of the IMF-supported programme.

The package included a combination of targeted and untargeted subsidies and cash transfers, as well as support relating to fertilizer and electricity price increases.

He said the experience provided a useful background for the IMF’s discussions on similar or continuing measures in response to the current external shock.

“The guiding goals are still the same,” Papageorgiou said, stressing that fiscal support should be carefully costed, time-bound and temporary and, to the extent possible, well targeted, particularly towards those most in need and the most vulnerable.

He added that such support needs to be implemented alongside efforts to safeguard the country’s fiscal buffers.

On Sri Lanka’s foreign exchange reserves, Papageorgiou said reserve accumulation had continued during July and August.

He said the Central Bank of Sri Lanka remained committed to the reserve accumulation targets that had been discussed with the IMF.

Referring to the IMF’s most recently published programme documents, Papageorgiou said those figures provide an indication of the targets the Central Bank has been working towards.

He said the Central Bank had been able to continue on the path of reserve accumulation, reflecting the importance of building external buffers.

“We are happy with the direction of travel,” Papageorgiou said.