Be patient says Ravi

By Rukshana Rizwie

Finance Minister Ravi Karunanayake called on citizens to be patient in pursuit of rapid economic development in the country, saying the recent tax hikes were 'momentary' and temporary, in the backdrop of a USD1.5 billion fund facility that was approved by the International Monetary Fund (IMF).

The IMF on Friday (3) approved a 1.5 billion US dollar loan to Sri Lanka under an economic program with $168 million dollars being disbursed as the first tranche.

"This will facilitate further enhancements from the Asian Development Bank (ADB) and other multi-lateral agencies which will help bring total lending to $3.5 billion," he said. These loans, he said will facilitate a quicker development process. He referred to the Elevated Highway from the New Kelani Bridge to Rajagiriya and the Moratuwa Bridge citing it as proof of the fast investment drive.

"Development aid is for the future and not to pay for past sins," he said. He added that it was unfortunate the government was prompted to increase taxes but assured that they were 'momentary and temporary' measures saying that each and every person ought to pay taxes for the 'sins' committed by the past regime.

As part of acquiring the IMF loan, the Sri Lankan government needs to make fundamental changes to fiscal policy, including tax reform and administration. The first tranche is part of a a 36-month Extended Fund Facility (EFF) worth about USD1.5 Billion.

The economic program is aimed at reversing a decline in tax revenue and to put public finances on a sustainable medium-term footing.

"Despite a positive growth momentum, Sri Lanka's economy is beginning to show signs of strain from an increasingly difficult external environment and challenging policy adjustments.

The new government's economic agenda, supported by the Extended Fund Facility, provides an important opportunity to re-set macroeconomic policies, address key vulnerabilities, boost reserves, and support stability and resilience," Executive Board discussion on Sri Lanka, Min Zhu, Deputy Managing Director and Acting Chair said in a statement.

"A clear commitment to exchange rate flexibility will enable adjustment to a shifting external environment while allowing the central bank to rebuild foreign exchange reserves and focus more closely on its key mandate of price stability."

He added that a return to fiscal consolidation, targeting a reduction in the overall fiscal deficit to 3.5 percent of GDP by 2020, is the linchpin of the reform program.

This includes rebuilding tax revenues through a comprehensive reform of both tax policy and administration supplemented by effective control over expenditure and putting state enterprise operations on a more commercial footing.