Sri Lanka’s Minister of Finance Ravi Karunanayake last week said the International Monetary Fund (IMF) has not imposed any conditions during the current negotiations leading up to the a three-year Extended Fund Facility (EFF) but expects the island to adhere to financial discipline. Addressing a G-24 Press Briefing held on the sidelines of the IMF and World Bank 2016 Spring Meetings in Washington on April 24, Karunanayake said that discussions with the IMF by government representatives, which began from the 31st of March, is presently continuing in Washington.
“As for the conditions, there are no conditions that are imposed. It is just that financial discipline is what is expected and I am sure it is something the government has been embarking on. On the austerity measures, the discussions are still not at the end. Certainly, they will revisit certain things, but that would not be categorized as austerity measures,” the Sri Lankan Finance Minister said responding to a question at the press briefing as revealed by a webcast of the conference released by the IMF Communications Department.
Speaking on revelations in the Panama papers, Minister Karunanayake said the government has given the necessary authority to investigate all areas where Sri Lankan companies have been involved, which has not been disclosed.
Meanwhile, Karunanayake noted that investigations pertaining to the recent cyber-heist in Bangladesh is also ongoing and pointed out the case has proved that Asian central bankers should in future work together to avoid such a situation.
“…At this particular moment, we are basically looking at protecting the Sri Lankan central bank authorities and other commercial bank activities. The Monetary Board, and my Secretary was there, did discuss this matter and certain steps have been taken to help protect the measures.
“As you can see, what happened in Bangladesh was a clear-cut case of hacking that was going on. It was the lack of awareness of the central bankers in the Asian region. So, it is grouping of knowledge, pooling resources, and working together to eradicate such things, because you do not know exactly at what level it has basically seeped in. That is the insulation that we are trying to get all the central bankers working together,” the Finance Minister emphasized.
Reuters news agency last week said Bangladeshi investigators have identified 20 foreigners – 12 Philippine nationals and eight Sri Lankans – suspected to have been involved in the cyber heist quoting a police officer from that country.
“The officer gave no other details, but the suspects appear to be those who received some of the payments, and not the hackers,” a Reuters news report said.
SL to suspend BOI law: Report
Sri Lanka will suspend an investment promotion law that gives sweeping tax breaks to companies and the budget is expected to show a surplus before interest costs by 2018 under a programme developed with the International Monetary Fund, a media report said.
The Sunday Times newspaper said the Board of Investment Act will be suspended as a series of ‘prior actions’ running up to an IMF deal. However, some ‘profit based tax holidays’ will still be available for investors the report said.
A reform-heavy three year Extended Fund Facility with the IMF is expected to be approved in early June, if a preliminary deal is agreed this month.
Though the central bank will get about 1.2 billion dollars to boost revenue, the real benefit to the country will come from the programme itself which will boost revenues and stabilize the economy, analysts say.
The deal targets a 5.4 percent of gross domestic product budget deficit (659 billion rupees) in 2016.
The government is expected to generate revenues of 1,031 billion rupees by the third quarter of 2016 and primary deficit (budget deficit before interest costs) of 71 billion rupees, the report said.
By 2017, the primary deficit should be 0.2 percent of GDP and in 2018, it should turn to a surplus of 0.3 percent of GDP.
The government will also have to come up with a cabinet approved plan with time lines to deal with state enterprises which are a burden to the people, including a repayment strategy for SriLankan Airlines.
Outstanding loans of state enterprises will have to be certified by the Auditor General, the report said.
A new income tax law will be introduced.
In 2016, 58 billion rupees of arrears to various ministries will have to be settled. These included a 24.1 billion rupee loans owned by the ministry of highways to National Savings Bank.
Other arrears included 7.8 billion rupees at Ministry of Home Affairs for unspecified projects, Ministry of Irrigation (3.0 billion rupees for Gin and Nilwala River projects and 1.58 billion for Yan Oya project), Ministry of Disaster Management 1.52 billion and a 7.95 billion rupee arbitration payment to Prima.
Sri Lanka is raising value added tax to 15 percent from 8 and 11 percent from May 02, with some items which are now exempt also coming under the net.