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IMF deal, state sector reforms seen boosting Sri Lanka growth

ECONOMYNEXT – Wide ranging reforms in the state sector that will include loss-making utilities like power and water to be agreed in a deal with the international Monetary Fund should boost Sri Lanka’s growth, a senior central bank official said. 

Sri Lanka urgently needs to reverse the declining tax revenues and worsening debt levels, P. Nandalal Weerasinghe, Deputy Governor of the Central Bank said.

“We’re now working with the IMF on fiscal consolidation,” he said at the launch of the new 2016 economic and social survey by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

“We are going to see very strong reforms focusing on addressing fiscal imbalances we have been having for about 10 years – declining government revenue and increasing spending.”

The IMF program will contain a large number of very important structural adjustment reforms of state owned enterprises like SriLankan Airlines, Ceylon Petroleum Corporation, Ceylon Electricity Board and the Water Supply and Drainage Board, he said.

“If we can implement those reforms, it will boost growth.”

Weerasinghe said an urgent need was to raise the revenue to gross domestic product ratio, which had been falling.

“It is politically difficult. We need to raise taxes. Policymakers need to convince the public that they should be able to pay more taxes. There’s no other choice as the government will have to collect more revenue.”

Weerasinghe said the government’s focus mirrored that of the theme of the UNESCAP survey of nurturing productivity for inclusive growth and sustainable development.

Only structural reforms would be able to increase the economic capacity to sustain medium to long term growth.

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“If you don’t have other sources of growth you need to boost productivity to gain additional growth. For higher productivity, you need structural reforms. That’s the only option for Sri Lanka.”
(Colombo/April 28 2016)
 

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