Peter Breuer, Senior Mission Chief of the International Monetary Fund (IMF), has delivered a candid reflection on Sri Lanka’s ongoing economic recovery, describing it as a “high price” paid for past policy missteps and a lack of preparation for external shocks.
Speaking at the launch of a book authored by Finance Secretary Mahinda Siriwardana, Breuer pointed to unsustainably low taxes and wide-ranging tax exemptions as a disaster in the making. “It was an accident waiting to happen,” he said.
He acknowledged the heavy burden now being carried by Sri Lankan taxpayers as the government works to restore fiscal stability. “The flip side of the government’s enhanced ability to fund essential services today is that taxpayers are shouldering a higher burden, proportionate to their income and wealth,” he explained. Fuel and electricity subsidies have been withdrawn, with consumers now paying the full cost—freeing up public resources for social protection.
“These sacrifices are necessary to ensure Sri Lanka can fully emerge from its still very vulnerable position and avoid a return to the calamitous conditions of 2022,” he stressed.
On his final day as IMF Mission Chief for Sri Lanka, Breuer shared a personal reflection of arriving in the country at the height of its crisis in June 2022.
“When I landed in Sri Lanka at 4 a.m., all I could see were miles of queues—cars, trucks, lorries. There were power outages, and economic activity had all but stopped. People were lining up for food and medicine,” he recalled. With barely any usable reserves and depleted public finances, the country declared a moratorium on debt payments.
Following months of negotiations, the IMF support programme was approved on March 20, 2023. Since then, Breuer noted, the country has undergone difficult but critical reforms.
“There are no more fuel or gas queues, no power cuts, and the economy has rebounded,” he said. Sri Lanka’s GDP grew by 5% last year, recovering nearly half of the output lost between 2018 and 2023. Inflation has been brought under control, tax revenue has increased, and borrowing costs have fallen from a staggering 30% in 2023 to around 8% today.
He credited the turnaround to the commitment and resilience of the Sri Lankan people.
However, Breuer emphasized the importance of maintaining momentum. “Disciplined macroeconomic policies and limiting tax exemptions are key to achieving stable and inclusive growth. Continued reforms will not only benefit this generation but the next,” he said.
He assured that the IMF would remain a “steadfast partner” in Sri Lanka’s journey toward a strong and durable recovery.
