IMF cautions Sri Lanka on the shift from concessional borrowings to more expensive loans
View(s):Sri Lanka’s economic outlook was positive and it is on the right direction recording low inflation and strong growth gained through exports, a top official of the International Monetary Fund (IMF) said.
Dr. Eteri Kvintradze, new IMF Representative for Sri Lanka and the Maldives (left) and visiting mission head Todd Schneider, addressing the media. Pic by M.D. Nissanka
However he cautioned the government on low tax revenue mobilization which remains a concern due to high debt level and the ongoing shift from concessional loans to more expensive loans on commercial terms.
Todd Schneider, head of the IMF mission for annual ‘Article IV’ consultations speaking to reporters on Friday, said recent real GDP growth of 7.3 per cent and the decline of inflation to below 5 per cent exceeded expectations.
The IMF team is projecting real growth to continue at around 7 per cent and inflation to close to current rates in 2014. They also predicted the continuation of strong export growth facilitating a further reduction of the external current account deficit.
‘Sri Lanka has been resilient to tapering pressures and is likely to remain so in 2014. Short term risks appear moderate and are closely linked to the recent drought and the impact of weak monsoon on growth and the balance of payments. Medium term risks are linked to lower than expected global recovery, an unexpected potential tightening of external liquidity which could affect rollovers and borrowing costs, and slower than projected revenue,” he said.
“Steady progress on fiscal consolidation and reduction of public debt is a linchpin of macro-economic stability in Sri Lanka and a critical factor in maintaining policy credibility and confidence. The deficit at 5.9 per cent of GDP in 2013 was welcome as is the commitment and confidence,” he added.
The visiting mission met the local business community during a 10-day stay, and expressed satisfaction on the Central Bank’s action to reduce interest rates.
Mr. Schneider noted that the broadening of the tax structure augurs well for Sri Lanka but it has to further strengthen tax collection.
He stressed the need to reduce public debt to GDP ratio and noted that the tax holidays and other concessions should not be given in an ad hoc manner by the Board of Investment.
| No education cuts recommended, IMF says
The International Monetary Fund said Friday that it has not made any recommendations to the Sri Lankan Government to cut down budget on education. Responding to a question raised by a journalist on the opposition leader’s revelation of an MOU between the IMF and the Government to cut the budget on education, Todd Schneider, head of the IMF mission said that this matter is not relevant to their mission. He said that education budgets were not the IMF mission’s purview and area of expertise and it is important to increase financial allocations for education in a prudent manner. Opposition Leader Ranil Wickremasinghe was recently reported in the media as saying they (UNP) would cancel IMF pacts with the Government, if and when the UNP comes into power. |