Sri Lanka, in the midst of a crisis over deterioration of the balance of payments (BOP) position, has got the much-needed reprieve with the International Monetary Fund (IMF) agreeing to provide $ 1.5 billion through a three-year-long Extended Fund Facility (EFF).
The facility is expected to yield an additional $650 million in other multilateral and bilateral loans. The total amount of support will be $ 2.2 billion.
Asked about the conditions of IMF, Governor of the Central Bank of Sri Lanka (CBSL) Arjuna Mahendran replied that the country was expected to achieve fiscal consolidation and improvement in the performance of State Owned Enterprises (SOE).
According to an IMF release, the government would seek to raise the tax-to-GDP (Gross Domestic Product) ratio to near 15 per cent by 2020 through the implementation of a new Inland Revenue Act, reform of VAT and customs code. Together with more efficient management of government expenditure, EFF would support a “steady reduction” of overall fiscal deficit to 3.5 per cent of GDP by 2020 — “equivalent to a shift from primary [excluding interest costs] fiscal deficits to primary surpluses that will underpin a much-needed reduction of public debt”.
