President Dissanayake says talks are ongoing with the IMF to attract FDI as the nation seeks growth after default
Sri Lanka is in discussions with the International Monetary Fund (IMF) to introduce targeted investment concessions in a bid to attract urgently needed foreign direct investment (FDI), President Anura Kumara Dissanayake announced at a recent economic conference in Colombo.
The dialogue with the IMF comes as Sri Lanka attempts to emerge from its worst economic crisis in decades, which led to its first-ever sovereign debt default. “We must create an attractive investment environment,” President Dissanayake said, emphasizing the need for “some concessions to incentivize investments.”
While the country has met several reform milestones under the IMF’s guidance, Dissanayake acknowledged that attracting sustainable levels of FDI remains a critical challenge. “We are not inviting FDI from the point of a strong economy but a weak one,” he noted, expressing concerns about whether current recovery signals are enough to lure global investors.
The president also made a broader point about the loss of national sovereignty that follows an economic collapse. “When the economy has collapsed, the state cannot be independent,” he said, underscoring the political and strategic costs of financial instability. He pledged an “unending effort” to restore Sri Lanka’s economic independence.
Dissanayake highlighted the plight of small and medium enterprises (SMEs), stating that 90% had failed not due to poor management but because of macroeconomic shocks and currency instability. He called for temporary but meaningful support to help SMEs recover and re-enter the economy.
The president’s remarks also touched on the deeper structural issues that contributed to the crisis: aggressive monetary policy, repeated rate cuts funded by printed money, and contradictory fiscal strategies. These policies, he argued, led to surging inflation, currency depreciation, and ultimately the default.
Sri Lanka’s economic path stands in contrast to East Asian countries that prioritize monetary stability. Nations like Cambodia and others in the region have avoided currency crises and maintained investor confidence through disciplined fiscal policies and moderate tax regimes. Sri Lanka, by contrast, has faced cycles of growth followed by collapse, compounded by high income taxes and volatile macroeconomic management.
While the IMF advises against sweeping tax holidays — warning they could undermine revenue collection and encourage corruption — the government is seeking a balanced approach. Dissanayake appears intent on negotiating room to offer limited, targeted concessions that can still attract investment without derailing fiscal reform.
The president’s remarks reflect a careful attempt to balance domestic economic needs with IMF program requirements, as Sri Lanka continues to walk a tightrope between recovery and further risk.