Sri Lanka needs more taxes to cover SOE losses, energy pricing to help: IMF
ECONOMYNEXT – Sri Lanka is on track to collect more taxes from a new income tax law, but losses at state enterprises and debt servicing requires even better budgets, the International Monetary Fund has said.
"…Sri Lanka’s high debt burden, large gross financing needs, and weak financial performance of state-owned enterprises increases the importance of further fiscal consolidation.," IMF Deputy Managing Director, Mitsuhiro Furusawa said after approving a 251.4 million US dollar (SDR 177.774 million tranche payment under a three year program.
Sri Lanka’s state-run Ceylon Electricity Board and Ceylon Petroleum Corporation is mis-used by the elected ruling class to give off-budget bank-financed subsidies which de-stabilizes the credit system.
Under the IMF program, market pricing of both fuel and electricity was to be have been original done before December 2016, but has been delayed to next year.
"Timely progress in structural reforms, including tax administration and energy pricing, will support fiscal consolidation," Furusawa said.
At the moment, CPC is running losses selling petrol, diesel and particularly kerosene. There are however excise taxes on petrol and some on diesel.
Cheap kerosene is encouraging distributors – especially those run by corrupt co-operative societies – to mix with petrol.
CPC is however selling furnace oil at a higher margin, which however may be hurting industries and the Ceylon Electricity Board.
The current administration has also suspended a court directed price formula for LP gas, generating financial volatility at Litro Gas, a state firm and Laugfs, a private listed business group, which has a distribution duopoly.
The administration has also failed to privatize SriLankan Airlines which has continued to run losses. A hole in SriLankan’s balance sheet expanded to 107 billion rupees in the year to March 2016, up from 80.4 billion rupees a year earlier.
A hole in the balance sheet has grown to 67.7 billion rupees by 2016, up 4.01 billion rupees from 2015, a report by the Public Enterprise Department of the Finance Ministry showed.
Sri Lanka Transport Board, a state bus service has guzzled 41 billion rupees in two years. A revamped income tax law under the IMFis only expected to bring an additional 25 billion rupees a year. (Colombo/Dec08/2017)