Sri Lanka raises taxes as debt cri­sis bites

The Pak Banker - - MARKETS/SPORTS -

Sri Lanka's govern­ment Tues­day an­nounced a slew of emer­gency tax in­creases to help com­bat a debt cri­sis that has forced it to seek a bailout from the In­ter­na­tional Mon­e­tary Fund.

PM Ranil Wick­remesinghe said the govern­ment would raise value added tax, cur­rently be­tween 8 per cent and 11 per cent, to a flat 15 per cent with im­me­di­ate ef­fect. The premier also said he would sus­pend a planned low­er­ing of cor­po­rate taxes for one year and re­vive a cap­i­tal gains tax, abol­ished in 1987, to take ef­fect from this year. The moves are aimed at re­pair­ing a mount­ing debt cri­sis that led rat­ings agency Fitch to down­grade Sri Lanka's credit rat­ing last week.

In a spe­cial state­ment to par­lia­ment, Wick­remesinghe blamed the pre­vi­ous govern­ment for al­low­ing debt to spiral, say­ing his min­is­ters had un­cov­ered $7 bil­lion (Dh25.7 bil­lion) in loans un­ac­counted for in the na­tional bud­get. "We have to over­come the debt trap of the pre­vi­ous regime," Wick­remesinghe said. "The global down­turn has re­duced room for re­struc­tur­ing this debt," he said.

The IMF sent a mis­sion to re­view Sri Lanka's econ­omy in Fe­bru­ary, say­ing it had warned the au­thor­i­ties they should make a "stronger ef­fort" to im­me­di­ately re­duce the deficit. The fund later con­firmed the is­land na­tion had asked for fi­nan­cial as­sis­tance, but did not give de­tails on the value of a po­ten­tial bailout. Pres­i­dent Maithri­pala Sirisena's govern­ment went on a spend­ing spree af­ter tak­ing power in Jan­uary 2015 to de­liver on elec­tion prom­ises of higher wages and lower prices.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.