IMF Facility will restore international recognition - President

The Extended Fund Facility (EFF) granted by the International Monetary Fund (IMF) will restore Sri Lanka's international recognition, ensure the country is not bankrupt and help banks regain international recognition, President Ranil Wickremesinghe told Parliament today. 

Making a special statement in Parliament on the IMF's EFF President Wickremesinghe further said that it will create opportunities for low-interest credit, restore foreign investors' confidence and lay the foundation for a strong new economy. 

Tabling the agreement reached with the IMF in Parliament, the President stressed that the receipt of the IMF Facility is a step towards building a better future for the youth & uplifting the country. The credit facility amounts to approximately USD 3 billion over four years, with the first tranche of USD 333 million to be received. Additionally, the country is expecting about USD 7 billion dollars more in rapid credit support from other parties, he further said. 

Some people consider the IMF EFF as just another loan, while others claim that the total debt of the country cannot be paid off with the amount received. These statements show either ignorance or a willingness to betray the country for political gain, he claimed. 

The President said that amidst numerous hardships, bearing all kinds of pressure, and undergoing suffering with equanimity, the people of this country remained calm and patient. Their commitment was a great strength in achieving the IMF Facility, he noted, extending his gratitude to the people. 

“We are now starting a new journey. We have to introduce many economic reforms throughout the process. The foundation for our success will be through this path. Some of these reforms have already been proposed and implemented through the interim budget of 2022 and the budget for 2023. We will introduce numerous other reforms.”

The government aims to reduce the primary deficit to 2.3% of GDP by 2025 and increase revenue to 14% of GDP by 2026. The standard corporate income tax rate has been raised to 30%, and sectoral tax holidays have been eliminated. The PAYE tax rate has been raised from 12% to 15%, and the tax exemption limit has been reduced from Rs. 300 million to Rs. 80 million, Mr Wickremesinghe said, explaining some of the economic reforms that government has enacted so far and plans to enact in future. . 

He revealed that the government plans to reduce existing tax exemptions on VAT by 2024, remove the simplified VAT system, and expedite its reimbursement. Estate Duty will be introduced as a property tax by 2025, with a minimum tax exemption allowance. 

President Wickremesinghe said the government aims to reduce the inflation rate to 4-6% and bring it to a single digit by mid-2023. The government also plans to reduce the budget deficit and refrain from printing money. The forex market thresholds and guidelines will be relaxed while allowing market criteria to determine its activities. The Central Bank plans to purchase foreign currency to build up foreign reserves.

The President said that with regard to good governance, the IMF is preparing a report to assess the governance framework & corruption in Sri Lanka, while laws against corruption in line with UN conventions will be drafted, together with a new Public Finance Management bill with strong fiscal policies and laws regarding foreign loans.

The government plans to make public the list of individuals and institutions who enjoy tax concessions and tax holidays, & large-scale government procurement contracts. These measures aim to increase transparency and combat corruption in the country, he emphasised.