Central Bank Governor Dr. Indrajit Coomaraswamy said the next tranche of the IMF loan, which was due to be disbursed in June, will be available with the tabling of the Inland Revenue Bill in Parliament shortly.
“One prior action needs to be completed which is the tabling of the Inland Revenue Bill in Parliament. The Bill has been gazetted dated June 19. Within 10 working days the Bill will be tabled in parliament,” he said.
The third tranche under the Extended Fund Facility (EFF) was scheduled to be disbursed following the completion of the second review, however, now the release of the tranche is subjected to the tabling of the Inland Revenue Bill in parliament. An IMF official said the completion of the second review of the EFF, allowing for the third tranche to be disbursed, is pending submission of the IRA to Parliament. Once this prior action is completed, the IMF Executive Board will be able to consider the government of Sri Lanka’s request to compete the second review under EFF.
He said the next review mission is proposed for September. However dates are still to be defined. In March, the IMF stated that it had reached a staff-level agreement with Sri Lankan authorities on the second review under an economic reform program supported by a three-year EFF arrangement, subject to the completion of a prior action by the authorities and the approval of the IMF Executive Board.
“The Board is expected to consider Sri Lanka’s request for completion of the second review in June 2017, by which time the new Inland Revenue Act is expected to be submitted to Parliament as a prior action. The new law should pave the way for a durable fiscal consolidation based on revenue mobilization—a key pillar of the government’s reform program”. However, tax experts said the new tax law should be to our liking and not to satisfy the needs of foreign parties.
The government sought USD 1.5 billion loan from the IMF on a reform agenda which primarily seeks to revise the age-old tax law to boost government revenue. The Value Added Tax was increased last year from 11 to 15 percent as the first step to scale up income for the Government. The government pledged to scale down tax exemptions and simplify the tax system.