The International Monetary Funds (IMF) on Wednesday expressed concerns over Sri Lanka’s fiscal deficit in 2015, after the new government raised wages and increased spending since taking power in January, Reuters reported.
The 2015 deficit target of 4.4% of gross domestic production (GDP) "will likely be very difficult to reach even with relatively optimistic assumptions regarding revenue gains", the body said.
"In the absence of new measures to create a more durable increase in tax collection, revenues in 2016 will drop as the one-off measures expire, while the permanent increase to recurrent spending from the revised 2015 budget will likely push the deficit higher," the IMF said in a statement.
Sirisena’s government has changed several policies, including reducing import taxes on some commodities and fuel prices, and introduced a one-off super gain tax to raise revenue by Rs80.3bn while increasing recurrent spending by nearly 6% or an extra Rs87bn ($652.66 million).
A higher deficit would raise some concerns about the government's ability to service its debt, the IMF said in the statement, which came after its third review of economic conditions in Sri Lanka following the completion in 2012 of a $2.6bn emergency loan to the country.
The fiscal deficit reversed a falling trend last year for the first time since 2009 and hit 6%, rising from 5.9% in 2013 and well above the government's 5.2% target, Reuters further said.
IMF rejects fresh bailout for Sri Lanka (05 March 2015)
Sri Lanka finance minister meets with IMF, World Bank (20 February 2015)
Sri Lanka to seek $4 billion IMF assistance (12 February 2015)
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