The International Monetary Fund (IMF) has urged Sri Lanka to diversify its export markets and create an investment-friendly environment to ensure economic stability and long-term growth, despite recent challenges caused by tariff changes.
Speaking at the 2025 Spring Meetings of the World Bank Group and the IMF on Thursday (24), Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department, emphasized how the unexpected tariff changes in Sri Lanka complicated economic forecasting and policy discussions.
He explained that IMF staff were in Sri Lanka for discussions with authorities when the new tariffs were announced, making it difficult to form a reliable macroeconomic framework. The sudden policy shift added uncertainty, particularly regarding the impact on exports and economic growth.
Srinivasan pointed out that Sri Lanka’s key industries—especially the garment sector—are highly vulnerable to tariff changes. He stressed the need for the country to reduce its reliance on a few export markets and instead strengthen regional trade ties to reduce exposure to such risks.
On investment, he highlighted the importance of encouraging domestic investment without undermining fiscal discipline. Rather than relying on tax incentives, he suggested creating a supportive environment where private investment can thrive.
Srinivasan also acknowledged the positive outcomes of Sri Lanka’s current IMF programme, noting improved macroeconomic stability, reduced inflation, and early signs of growth recovery. He concluded that now is the right time for Sri Lanka to implement broader structural reforms to boost private sector investment and ensure sustainable economic development.
