IMF agrees $1.5 billion loan for Sri Lanka

Colombo: The IMF has agreed a $1.5 billion loan for Sri Lanka in support of economic reforms aimed at reversing a two-decade decline in tax revenue and reviving growth, it said yesterday.

The International Monetary Fund’s chief for Sri Lanka, Todd Schneider, said a staff-level agreement was reached to release $1.5bn over a three-year period in support of the island’s reform agenda.

“This agreement will be subject to completion of prior actions and approval by the IMF’s Executive Board, which is expected to consider Sri Lanka’s request in early June,” he said. The island has already announced an increase in value added tax (VAT) from 11 to 15 per cent from Monday. It has also said it will scale down tax exemptions and promised to simplify revenue collection.

The IMF said the Sri Lankan government will seek to raise its tax-to-GDP ratio to 15pc by 2020 from the current level of 11pc. Schneider said the IMF’s Extended Fund Facility (EFF) to Sri Lanka was expected to “catalyse an additional $650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion”. An EFF is designed to help countries resolve serious balance of payment problems brought on by structural weaknesses in the economy.