The International Monetary Fund (IMF) does not support providing subsidies to everyone in Sri Lanka.
Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department said that there needs to be targeted support to the poor and vulnerable in Sri Lanka.
“We fully sympathize and understand the hardship faced by people in terms of falling wages, cost of living increases, and so on, and we’re fully sympathetic to that. But again, the program, we do have, , prices reflecting cost recovery. And why is that important? It’s important because otherwise the electricity sector faces losses and that becomes a public problem down the road. So, you have to have cost recovery. I think that’s important. You also don’t want to provide, subsidies to everyone. It should be more progressive. And here we believe the targeted support to the poor and vulnerable is the way to go,” Srinivasan told reporters.
He also said that efficiency in the energy sector and the electricity sector could be increased through structural reforms.
“And, in general, SOE reforms are important in Sri Lanka. And that’s part of the program we have where the IMF working at the World Bank is pushing ahead with reforms to SOEs, including in the electricity sector,” he added.
Krishna Srinivasan also said that as part of the IMF review on Sri Lanka, what will be required will be financing assurances.
“In that context we will look to see how much progress has been made on debt restructuring efforts and if there are any agreements, then how do they square with the debt targets and so on? So, it’s part of the process of the second review,” he said.
Srinivasan said that the financial sector review will look at what restructuring is taking place within other creditors, including private creditors.