As Sri Lanka's fragile economic recovery enters a crucial phase, the International Monetary Fund (IMF) has stressed the importance of sustaining reform efforts to ensure long-term stability. In a statement issued at the conclusion of their recent mission to Colombo, the IMF highlighted the need for continued fiscal discipline and strategic revenue generation to solidify the nation's progress.

The IMF underscored the necessity of raising fiscal revenues as part of the 2025 Budget, which is pivotal to achieving a primary balance target of 2.3 percent of GDP—a key metric for restoring debt sustainability. Among the measures proposed is the planned relaxation of import restrictions on motor vehicles, which is expected to bolster revenue collection in the upcoming year.

In addition to easing import restrictions, the IMF advised the Sri Lankan government to implement tax administration reforms, including the establishment of a functional VAT refund system for exporters by April 2025. These steps are seen as vital for improving tax compliance and securing a more predictable and transparent fiscal environment.

The IMF also cautioned against introducing new tax exemptions, which could lead to corruption risks and revenue leakages, thereby undermining fiscal stability. They emphasized the importance of maintaining energy prices at cost-recovery levels to avoid additional fiscal burdens.

Furthermore, the IMF highlighted the need to protect the poor and vulnerable populations through better-targeted cash transfers, warning that any policy missteps could jeopardize the country's recovery. As Sri Lanka navigates this delicate period, the IMF's recommendations aim to provide a roadmap for maintaining macroeconomic stability and achieving sustainable growth.