IMF urges Govt on tougher measures to narrow fiscal deficit

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Monday, February 8, 2016 - 01:00

Minister of Finance Ravi Karunanayake meeting the IMF team at the Finance Ministry last Friday.

The visiting International Monetary Fund (IMF) has advised Sri Lanka to take tougher measures to narrow the fiscal deficit. The team has also urged to put public finances on a sustainable path.

The visiting team headed by Deputy Director IMF, Kalpana Kochhar also met with Minister of Finance Ravi Karunanayake last Friday at the Finance Ministry and these sentiments were discussed as well.

According to an official from the Finance Ministry the IMF team had also discussed protective measures Sri Lanka should take to insulate the country on the way the global economy is moving. “There had being steady progress on some areas in Sri Lanka including economic growth rate,”she said.

The visiting team also commended the 2016 budget proposals which eliminated several special purpose levies and measures taken to increase tax revenue.

The IMF mission team however said that budget deficit is likely to increase and borrowing from both foreign and local markets was a way out to breach this gap. In 2015 the budget deficit is estimated to have topped 7 percent of GDP. “These imbalances are also set against an increasingly less benign external environment,” the statement said. “Set against such risks, the mission emphasized the urgent need for Sri Lanka to bolster its economic defences.”

Subsequently it was indicated that the country is seeking a loan from the IMF this year.

“The mission has advised the government to urgently make a stronger effort to narrow the fiscal deficit and put the public finances on a sustainable path,” the IMF said in a statement.

The International Monetary Fund confirmed the island nation had asked for assistance, but did not give details on the value of a potential programme or say whether it would grant the request.

“The IMF has received a request for a program with Sri Lanka,” the fund said in a statement from its headquarters in Washington DC.

Sri Lanka received $2.6 billion from the IMF in 2009 to boost its financial reserves, which had dropped below $1 billion at the height of fighting between Tamil Tiger rebels and government forces.