More bitter medicine to come

By Rathindra Kuruwita

The government would announce Sri Lanka’s debt restructuring strategy within this month, State Minister of Finance Ranjith Siyambalapitya told the media on yesterday (04.)Siyambalapitya said that the government would reduce taxes and bring down the debt to GDP ratio in the next five years, as the economy stabilise.

Tax revenue targets would be met upon further expansion of the tax base in the coming years, the state minister said, adding that the current debt to GDP ratio was 128 percent and it would be reduced to 95 percent in a few years.

However, there were more difficult targets to achieve and the government would have to take more unpopular decisions in the coming years, he said.The state minister said that the Central Bank had previously planned to announce a debt restructuring strategy in April.

However, the strategy is still being formulated and will be presented within the month.

Sri Lanka needs to confront the challenge of restructuring domestic debt while maintaining financial stability, IMF Asia and Pacific Department Director Krishna Srinivasan said Wednesday.

Srinivasan said inflation has reduced in the country and that Sri Lanka needs to emphasise macroeconomic stabilisation and reducing inflation.

“Fiscal consolidation is based on revenue based consolidation. That’s partly because Sri Lanka has among the lowest in terms of revenue mobilisation, tax collection. And that goes back to the policy mistake they made pre-pandemic, wherein they cut taxes across the board, whether it’s VAT, corporate tax, and personal income tax. So the IMF supported programme is a revenue-based consolidation programme which provides stability to the economy,” he said.