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IMF cautiously optimistic about SL’s economic recovery, stresses importance of tax reforms and fiscal discipline

January 21, Colombo (LNW): The International Monetary Fund (IMF) has expressed cautious optimism regarding Sri Lanka’s economic recovery, emphasising the pivotal role of tax reforms and fiscal discipline in navigating the nation through its profound financial crisis.

IMF Senior Mission Chief to Sri Lanka Peter Breuer underscored the significance of tax administration in addressing the revenue shortfall that has contributed to the ongoing crisis.

He called for heightened compliance, condemning tax evasion and emphasising that any uncollected taxes increase the burden on other taxpayers.

Breuer commended the Sri Lankan government’s commitment to halting further tax concessions and highlighted planned reforms to enhance transparency in this regard.

Notably, the tax revenue-to-GDP ratio has decreased from 11 per cent in 2019 to a mere 7 per cent in 2022, resulting in a substantial funding gap.

The IMF mission chief outlined an ambitious trajectory for increasing tax revenue, targeting 9 per cent of GDP in 2023, 12 per cent in 2024, and 14 per cent in subsequent years.

While acknowledging the challenges posed by tax increases, Breuer emphasised their necessity for Sri Lanka’s long-term financial stability.

He provided details on the government’s reform measures, citing changes to personal income tax and corporate income tax implemented in 2022.

He also mentioned the planned introduction of a progressive property tax in 2025, emphasising its role in creating a fair taxation system where those with more valuable properties contribute proportionately higher taxes.

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