Former Deputy Governor of the Central Bank of Sri Lanka (CBSL) Dr. W.A. Wijewardena is of the view that the government is constrained by its agreement with the International Monetary Fund (IMF) and the benchmarks set by the Economic Transformation Act, making it challenging to achieve the targeted revenue of 15.1% of GDP this year.

He expressed that the government should introduce new taxes to achieve the revenue targets set for the year in order to not lose the fourth tranche of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) program.

“The government of President Anura Kumara Dissanayake has been constrained in its budgetary policy formulation by two factors which have been beyond its control. One is the loan agreement signed by the previous government with the IMF which President Dissanayake has agreed to implement without any amendment”, Dr. Wijewardena said.

“The second one is the economic transformation act that was passed by the Parliament just before the new President was elected where in which the government has several benchmarks to fulfill in terms of the law when they prepare its budget for the 2025.”

“One of the requirements under the IMF as well as the economic transformation act is that Sri Lanka should attain revenue of the government amounting to 15.1% of the GDP for 2025, which comes to about Rs. 5.5 trillion. That is a massive target for the government”, he added.

“Without having new taxes introduced on people, there is no possibility for the government to reach this level. If the government is unable to reach this level the fourth tranche of the IMF will not be delivered to Sri Lanka. It will also be non-compliant with the economic transformation act.”

“In addition to that, there had been certain contentious taxes that had been proposed by the previous government to IMF – one is the property tax. Now this tax has been abandoned by the present government and as a result it will have to introduce a new tax to raise the same revenue because of the revenue loss”, Dr. Wijewardena expressed.

“Because of these reasons the budget cannot deliver that much of provisions to the people as it has to confine its budgetary policy within the IMF as well as the prescribed limits of theeconomic transformation act”, said the ex-Deputy Governor of the CBSL.