Sri Lanka pledges to cut budget deficit to clinch IMF bailout

THE IMF FACILITY WILL ALSO HELP SECURE OTHER LINES OF FUNDING FOR SRI LANKA, WHICH NEARLY RAN OUT OF FOREX RESERVES THIS YEAR

COLOMBO: Sri Lanka pledged to boost tax revenues and reduce the budget deficit, as it seeks to wean the economy away from populist policies to win bailout funds from the International Monetary Fund (IMF).

The government targets revenue of 3.4 trillion rupees ($9.27 billion) in 2023, up 63% from the current year while limiting the increase in spending to 31% yearon-year, according to budget documents presented by President Ranil Wickremesinghe, who doubles as the South Asian country’s finance minister.

That will help narrow the fiscal deficit to 7.9% of gross domestic product from an estimated 9.8% in the current year. The proposals on Monday, which build on interim measures announced in August, pegged gross foreign borrowing at 1 trillion rupees.

Wickremesinghe is seeking to meet conditions for securing a $2.9 billion IMF bailout, key to pulling the nation out of its worst economic crisis in decades.

The IMF facility would also help Colombo secure other lines of funding for the South Asian nation, which nearly ran out of foreign exchange reserves this year, resulting in a sovereign debt default, paralysing shortages and Asia’s fastest inflation.

Sri Lanka, currently experiencing consumer-price growth of 66%, will aim for mid-single digit inflation in the mediumterm, he said.

The government plans tax and fiscal law reforms, the president said, adding that the budget proposals look beyond addressing near-term problems, and are aimed at helping return the economy to 5% annual growth in the medium-term and 7%-8% in the longer run.