COLOMBO: In a first time visit by an IMF head, Christine Lagarde the Managing Director of the International Monetary Fund (IMF) will be arriving in Sri Lanka on Sunday in order to follow up on the implementation of IMF loan repayment conditions
Last year, the IMF approved a $US1.5 billion loan, to be paid in six installments, subject to the government meeting the IMF’s targets. The government pledged to reduce the fiscal deficit to 3.5 percent of gross domestic product by 2020, which is half the deficit for 2015. The target is to be achieved by restructuring state-owned enterprises, including through their privatisation, and by slashing subsidies and increasing taxes.
The IMF-Sri Lankan government agenda includes “improving revenue administration and tax policy; strengthening public financial management; state enterprise reforms; and, structural reforms to enable a more outward-looking economy, deepen foreign exchange markets, and strengthen financial sector supervision.”
After this agenda was discussed last year, Prime Minister Wickremasinghe unveiled a value added tax (VAT) increase from 11 to 15 percent and other tax proposals. This was followed by public outrage and fear that these measures would lead to a drastic decline in the living standards of working people with the dramatic increase in price of essentials and slashing of government subsidies.
Lagarde is arriving after the IMF said that the government had “missed key benchmarks” which were to be implemented by December, the Economy Nextreported. These “benchmarks” included restructuring six of the largest state-owned ventures — the Ceylon Petroleum Corporation (CPC), Ceylon Electricity Board (CEB), Sri Lankan Airlines, National Water Supply and Drainage Board (NWSDB), Airport and Aviation Services, and Sri Lanka Ports Authority.
Also under discussion, will be alternate methods of accruing monies such as the sale of “non-strategic” assets such as the Colombo Hilton Hotel, Lanka Hospitals, the Hyatt Hotel and SriLankan Airlines. The IMF has estimated their sale could earn the government $1.5 billion.
Among the IMF’s concerns, is that the Sri Lankan government’s problems could lead to a loan default. The government is seeking to raise $3.6 billion for the settlement of loans and interest payments this year, almost double last year’s requirement of $1.82 billion.
The government’s main concern is that the IMF’s measures will immediately trigger struggles of workers and the poor. The government is already facing protests by workers, farmers and students against reduced living conditions and the privatization of education.
