Tax Exemptions Should Not Be The Only Tool Used To Attract FDIs : IMF

COLOMBO (News 1st); The International Monetary Fund (IMF) has emphasized the critical role of Foreign Direct Investment (FDI) in shaping Sri Lanka’s macroeconomic recovery and long-term growth, while urging the government to maintain policy continuity, macroeconomic stability, and reform momentum to attract and retain global investors.

IMF Mission Chief Evan Papageorgiou said that FDI is a cornerstone of Sri Lanka’s economic framework and a key indicator of investor confidence.

He noted that the country’s current trajectory—marked by macroeconomic stability, progress in debt restructuring, and commitment to the IMF’s Extended Fund Facility (EFF) programme—sends positive signals to international markets.

He stressed that beyond fiscal and monetary stability, Sri Lanka must improve its business environment by fostering competition, enhancing infrastructure, and expanding digital connectivity, logistics, and port access. Establishing free trade agreements (FTAs) and streamlining labour market regulations were also highlighted as essential steps to boost competitiveness and attract investment.

Papageorgiou pointed out that labour market flexibility and access to a skilled workforce are vital for sustaining investor interest. He called for the removal of rigidities and modernization of labour laws to align with global standards.

On the issue of tax exemptions, Papageorgiou acknowledged their role in incentivizing investment but cautioned against overreliance.

He referenced two structural benchmarks under the IMF programme related to the Strategic Development Project (SDP) framework and the Port City Act, noting that discussions with authorities are ongoing and progress is being made.

“Tax exemptions should not be the only tool used to attract FDI,” he said, adding that a balanced approach is necessary to ensure long-term fiscal sustainability.