https://www.ft.lk/top-story/IMF-feels-SL-s-pain-but-insists-tax-hikes-are-critical/26-745894

"IMF feels SL’s pain but insists tax hikes are critical"

“Sri Lanka is among the countries to collect the least amount of fiscal revenue in the world, with tax revenue to GDP ratio at only 7.3% in 2021. External creditors are not willing to provide financing to fill this gap,” IMF officials added.

I hate IMF so fucking much. The tax revenue to GDP ratio is pretty much meaningless. The Sri Lankan Government collects taxes in Rupees, not dollars or any other foreign currency. The IMF doesn't have to pay the Sri Lankan Government to balance their budget, as they can manage it themselves by issuing domestic currency bonds or creating money.

Last year, the government did create money to finance the deficit, but this was due to a forex shortage that caused inflation, leading to depreciation and even higher inflation.

The real issue here is the lack of foreign exchange (i.e., Dollars/Euros, which the Sri Lankan Government can't print) caused by a negative balance of payments. The fiscal deficit doesn't have a one-to-one relationship with the BoP deficit. The IMF's rhetoric is so ridiculous. It is to be noted that the current high inflation in Sri Lanka is partly due to currency devaluation by the central bank in order to gain access to IMF loans and maintain forex reserves.

By increasing power tariffs and indirect taxes, the government is only making inflation worse and damaging the manufacturing sector. This, in turn, will make achieving self-sufficiency and reducing forex dependency even more challenging.

The IMF's "solution" is basically to make the poor (and slightly better-off workers) even poorer in order to reduce demand for goods/services.