IMF says Sri Lanka yet to formally request BOP support
The International Monetary Fund (IMF) says cash-strapped Sri Lanka is yet to make a formal request for a bail-out package even though state authorities have spoken of fund support ‘soon’.Replying to an e-mail sent by the Business Times, the IMF office in Colombo noted that the government has raised “some questions about a programme supported by the IMF” as one option in addressing current balance of payments pressures.
“However, we have not entered into negotiations on a program(me) nor do we have any new missions to Colombo scheduled outside of technical assistance”, a spokesperson said. “If a formal request is received, the IMF would send a mission to assess macroeconomic vulnerabilities, the nature and size of balance of payments needs, and government’s policies to address these vulnerabilities,” the fund official added.
Sri Lanka is currently grappling to overcome fiscal challenges and restore macroeconomic balance in the worsening balance of payment outlook as budgetary support from donors is unlikely to be immediately forthcoming. Foreign reserves have slumped to US$6.4 billion from $8.2 billion at the end of 2014.
Finance Minister Ravi Karunanayake has said that the World Bank and the International Monetary Fund have already agreed to extend unconditional support for Sri Lanka’s development initiatives.
“This is a golden opportunity for Sri Lanka. They have been closely watching the success achieved in the political front. Hence the World Bank and the International Monetary Fund stand ready to extend finance assistance to revive the country’s economy. We are ready with our set of proposals. I have no doubt that they will respond positively to them. I must reiterate that we are not subject to any conditions imposed by the World Bank and the IMF,” he was quoted as saying in the Treasury website during meeting on the sidelines of the annual meeting of World Bank (WB) and IMF at Lima in Peru earlier this month.
According to Treasury sources, Sri Lanka still owes the IMF 200 per cent of its quota for the previous standby agreement and the country right now is not in a comfortable position. It has one of the lowest tax-to-GDP ratios in the world.The 2016 budget is an opportunity to enter a durable medium-term path of fiscal consolidation and to set macroeconomic priorities for 2016 and beyond, a senior official told the Business Times.
He added that the Treasury wants to keep the 2016 fiscal deficit to 5.5 to 6 per cent of GDP eliminating tax exemptions and tax holidays to make the tax system simple, fair and efficient.