Visiting IMF First Deputy Managing Director Dr. Gita Gopinath on Monday praised Sri Lanka’s “impressive progress” following its unprecedented sovereign default, but cautioned that the country must not slip back into its historical pattern of reform fatigue and economic mismanagement.
Speaking at a high-level conference held at the Shangri-La Hotel in Colombo, Dr. Gopinath noted that while Sri Lanka’s economic recovery is underway, it remains fragile and hinges on the government’s continued commitment to the IMF-supported reform programme.
“This time must be different,” she stressed, echoing the title of her speech. “Out of Sri Lanka’s 16 previous IMF programmes, half were cut short. Hard-won gains were reversed. The country cannot afford to do it again.”
Reflecting on the roots of the 2022 crisis—marked by fuel shortages, soaring inflation, and stagnant growth—Dr. Gopinath pointed to decades of fiscal mismanagement, the depletion of foreign reserves, and an unsustainable build-up of debt. She highlighted that Sri Lanka’s decision to enter into a wide-ranging reform agenda under the IMF’s Extended Fund Facility (EFF) has begun to yield results.
According to Dr. Gopinath, macroeconomic stability has been restored, inflation is under control, and GDP growth is projected at 5% for 2024. Shortages of essentials such as fuel and medicine have been resolved, tax revenues have increased by two-thirds relative to GDP, and the country’s sovereign credit ratings have improved. Furthermore, Sri Lanka’s bonds have re-entered global indices.
A key component of the recovery process was the restructuring of $25 billion in external debt, including $3 billion in debt forgiveness. Dr. Gopinath acknowledged the success of this effort and highlighted the critical role played by creditor coordination, particularly through the Official Creditor Committee co-chaired by France, India, and Japan, with China’s de facto cooperation also contributing significantly.
She emphasized that Sri Lanka’s experience offers important global lessons: debt relief must be tailored to individual country contexts; effective creditor coordination is essential; and domestic debt reprofiling must be handled carefully to ensure financial and social stability.
Despite the progress made, Dr. Gopinath urged Sri Lanka to sustain its reform momentum. She identified persistent challenges, including a high poverty rate of 24.5% in 2024, continued corruption, and elevated levels of domestic debt.
She stressed the importance of transparency, inclusive policy-making, and engaging all segments of society. “This is a time to think, question assumptions, and build consensus,” she said. “With determination and courage, Sri Lanka can recover stronger and more resilient.”
Dr. Gopinath reiterated the IMF’s continued support and echoed President Anura Kumara Dissanayake’s sentiment that this should be the country’s final IMF programme. “Today’s decision is reform or regret,” she warned, calling on Sri Lanka to convert its recovery into lasting, inclusive growth.
Earlier, President Dissanayake had expressed hope that Sri Lanka would never again need to resort to an IMF bailout.
