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IMF pours cold water on Sri Lanka budget deficit, revenue targets

COLOMBO (EconomyNext) – Sri Lanka’s 2015 revised budget deficit target of 4.4 percent of gross domestic product would be "challenging" and the government should consider additional measures if planned revenues do not come, an International Monetary Fund official said.

An IMF mission was in Colombo this week for consultations on a previous bailout package of which half has been paid down already.

"In the mission’s assessment, achieving a deficit of 4.4 percent of GDP will be challenging and the authorities should consider contingency measures should revenues fail to materialize as projected," IMF mission Chief Todd Schneider said.

"Further one-off tax measures introduced to finance the Interim Budget do not in the mission’s view constitute a step toward a more effective tax system."

The one-off taxes had come under fire for being retrospective in the case of a so-called ‘super gains tax’ and vengeful and being against the rule of law and tax principles in the case of billion rupee levies which may lead to the closure of some of the firms.

The administration however has said it planned to simplify taxes in 2016 if they come back to power in elections to be held later this year.

Sri Lanka is expected to go to international markets for a 1.5 billion US dollar bond issue shortly.

In addition Sri Lanka has also raised gilt rates, which analysts say will help curb consumption and boost savings available for credit – especially to the state – to finance additional spending.