IMF serious on tax reforms

By Sulochana Ramiah Mohan

The IMF (International Monetary Fund) team that visited Sri Lanka last week said it is ready to consider the grant of $330 million of $2.6 billion loan package after completing a series of review on the government’s plans for a full-year 2010 budget, including tax reform measures.
One of the criteria, the tax reform measures, according to a CB official is the tax structure where one person pays many taxes, and the ad hoc tax measures the government considers with the prevailing situation of the country being seriously looked into.
After the upcoming general election and before the budget, the IMF officials are expected to visit again which would be in the month of May, the official revealed.
CB missed the target of 2009 fiscal year in the last quarter; the net domestic target which has been now considered to be reviewed by the IMF officials.
The CB targets that have to be met are as follows: the net domestic finance of the government, the reserves and the international resources.
As for revenue, it was low and the project related expenses were higher than expected but the IMF officials will look into other various aspects before granting the third tranche of 2.6-billion-dollar bailout package loan, the official revealed.
The treasury will release the 2009 fiscal target on March 2, 2010 it was revealed.
The IMF team chief, Brian Aitken said, “IMF may consider changing a $2.6 billion loan package to Sri Lanka after the country’s 2009 budget deficit exceeded the lender’s target under the aid programme.’’
He said, “We remain engaged in a constructive dialogue with the government, with the aim of agreeing on policies to support staff’s recommendation to IMF Management and the IMF’s Executive Board for the completion of the current review of the Stand-By Arrangement. The next step in this process would entail an IMF staff visit to Colombo, following parliamentary elections and the formation of the new cabinet, to discuss with the government its plans for a full-year 2010 budget, including tax reform measures.”
The IMF chief added, “For end-December, the government has met the targets agreed under the programme for net international reserves and reserve money. Final data for the overall budget balance are not yet available, but the ceiling on domestic budget borrowing—consistent with the government’s overall deficit target of 7 percent of GDP—was exceeded by a substantial amount. This mainly reflects faster-than-expected infrastructure project implementation, higher interest payments, and sluggish fourth-quarter revenue growth. We are currently assessing the implications of this outturn for bringing the underlying budget deficit to a sustainable level.” 
The mission met with officials from the Central Bank, the Ministry of Finance & Planning, the Presidential Tax Commission, and other government ministries and departments, as well as representatives of civil society and the private sector.   

IMF team at Hambantota Port

Meanwhile the IMF team visited the Hambantota Port Development Project to inspect the progress of the Hambantota Port. The first stage of the Port development Project which is kept ahead the schedule is to be completed by the end of this year. The total cost of the Project is US $ 360 million. An oil tank farm with 14 tanks under the investment of US$ 76 is also constructed at Hambantota Port. The tank farm consists of eight tanks for fuel bunkering facilities for vessels while three tanks for aero fuel and three tanks for storing LP gas. The 14 tanks will also have an overall capacity of 80,000m3. Funds for the total Hambantota Port Project was received from the People’s Republic of China.
Once the Hambantota Port is completed the vessels could save nearly three days sailing of time, fuel and enjoy a number of other benefits at Hambantota. It is envisaged that many of the 4,500 oil tankers would be anchored at Hambantota for bunkering, ship repairing and also to purchase food, water, medical supplies as well as logistics.