The IMF has concluded the third Post Program Monitoring discussion with Sri Lanka and issued a press release on 5 May 2015 summarizing its findings. Sri Lanka’s GDP growth was 7.4% in2014 and is estimated to be 6.5% in 2015 and later years. However the fiscal deficit exceeded the 2014 budget target by 1% of GDP owing to a decline in the ratio of tax revenue to GDP that was not offset by spending cuts.
The IMF considers that the 2015 deficit target will be difficult to reach even if optimistic assumptions are made about gains in government revenue. Unless measures are taken to increase the level of tax collection on a permanent basis the government revenue in 2016 will fall as one-off measures expire.
The IMF noted that the deficit target in the 2015 budget depended largely on one off revenue measures and considers that more ambitious measures should be planned to contain the current expenditure while protecting social and infrastructure spending. These measures should include comprehensive tax policy and administration reforms in the medium term including reductions in tax expenditure and a simplified tax system with a wider revenue base.
