- Sri Lanka must continue to raise taxes to achieve a budget surplus excluding interest payments in 2025 and beyond as per the bailout plan by the International Monetary Fund (IMF), Bloomberg Intelligence said.
- Debt restructuring is projected to reduce interest payments to 5.7% of GDP in 2032 from 7.9% in 2023.
Bloomberg Intelligence further noted that Sri Lanka's fiscal policy has been restrictive since 2022, with tax revenues expected to rise to 12.1% of GDP in 2023 from 7.3% in 2022. A one-off expenditure of 450 billion rupees to recapitalize banks hit by bad loans during COVID and the debt crisis will likely result in a budget deficit excluding interest payments this year. Without this expenditure, the government would achieve a primary surplus of about 0.8% of GDP in 2023. The report suggests fiscal policy will remain contractionary in 2025, with further tax increases expected to ensure a primary budget surplus and initiate debt repayment. The IMF will continue lending only if these surpluses are maintained, limiting the government's ability to use fiscal policy to stimulate growth for the foreseeable future.
https://publicfinance.lk/en/topics/must-continue-raising-taxes-to-stay-in-imf-prog-1715822941
