New structural reforms under IMF package

Rukshana Rizwie

Wide ranging reforms in the tax system, administration of the state-owned enterprises and pricing of electricity and fuel are to be restructured under the three year International Monetary Fund USD 1.5 Billion bailout package, Deputy Governor of the Central Bank Nandalal Weerasinghe told the Sunday Observer.

Last week, Sri Lankan authorities and the IMF reached a staff-level agreement on a 36-month Extended Fund Facility (EFF) for a $1.5 Billion loan, Todd Schneider, IMF Mission Chief for Sri Lanka said in a statement. The three-year loan which will require IMF board approval in June is subject to Sri Lanka implementing reforms, including streamlining the tax code and reducing a bloated deficit meant to avert a balance of payment crisis in the country.

"We are yet to see the detailed content of this report," Weerasinghe told the Sunday Observer when asked if Sri Lanka is in agreement with the proposed structural reforms. "A process for release of the loan and the reforms thereafter will be known once Sri Lankan authorities are in agreement with the terms."

The country will see the first round of tax increases starting with the rise in value-added tax to 15% from 11% which kicks in on Monday. With policy shifts, "Sri Lanka will support growth and build resilience to future economic shocks," said Todd Schneider, IMF mission chief for Sri Lanka. The IMF chief also expected the IMF deal to "catalyze" an additional $650 million in loans.