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Tax policy measures last push to get revenue to 15% of GDP: IMF

17 Jun 2024 - {{hitsCtrl.values.hits}}      

  • IMF Senior Mission Chief for Sri Lanka Peter Breuer says policies are only a “small adjustment”
  • Asserts key causes of SL’s economic crisis is lack of revenue, which the programme is looking to address

While businesses and individuals in Sri Lanka are likely to witness more pain as plans are underway to bring in more taxes, the International Monetary Fund (IMF) asserted the measures are essential to increase the island nation’s reserves.

Peter Breuer addressing the media in Colombo in March
Pic by Pradeeep Pathirana

The Fund acknowledged that developments are seen in this regard, however the ground reality is that the general public is under greater financial distress having left with lesser 
disposable income.

Significant progress has been made in 2023 as well as in 2024. And it is sort of one more push to get revenues to the region of 15 percent of GDP in 2025, said IMF Senior Mission Chief for Sri Lanka Peter Breuer referring to the new tax policy measures. 

According to the lender, the policies are only a “small adjustment”. 

“In some economies, when the economy is in a downturn, then you think about stimulating the economy, and so you would adjust fiscal policy accordingly. In Sri Lanka, however, the cause for the crisis is the collapse in fiscal revenue that led to the fact that Sri Lanka was not able to service its debt anymore and it went into default. 

“So in Sri Lanka, one of the key causes of the crisis is the lack of revenue, and that is, you know, being addressed with the programme,” said Breuer addressing an online press-briefing following the approval of the second review. 

The IMF pointed out that Sri Lanka between 2019 and 2022 had general government revenues on average of about 9.3 percent, and that compares to an average of these other countries of 26 percent of GDP. 

“So again, almost three times as much. So this is really what, what this programme is seeking to address,” Breuer stressed.

Meanwhile, with regard to comparability of debt treatments, this is a concept that is important for Official Creditors, the Fund said.

The Senior Mission Chief for Sri Lanka noted that the concern is whether the debt relief offered is in line with that offered by other creditors. 

Breuer noted it is not something that is relevant for the IMF, at least not directly. 

“It is indirectly in the sense that we need all creditors to participate in the debt restructuring in order to restore debt sustainability. 

“But from the IMF’s perspective, what matters is whether the debt restructuring targets are being met.