Hong Kong - The Sri Lankan government has pledged its commitment to strong fiscal discipline in line with conditions stipulated for a bailout by the IMF.
“We should have a national vision to address burning issues in the economy, including fiscal-sector operations,” Finance Minister Ravi Karunanayake, told the FinanceAsia Sri Lanka Investment Summit in Hong Kong on Thursday.
He said the “best way” for Sri Lanka to move forward is through “fiscal consolidation” supported by reforms in tax policy and administration.
“We set our target at 3.5% of budget deficit by 2020. And we gradually ensure the impacts of fiscal consolidation coming in,” Karunanayake said, reiterating that the government is targeting a budget deficit of 4.6% this year -- 10 basis points below the IMF’s projection.
Karunanayake indicated that the government could grow its revenue to 15.3% of the country’s gross domestic product from 13.8% last year, made possible by a higher rate of value-added tax and by relying more on public-private partnerships to lessen the expenditure burden.
He was confident that government expenditures would be “controlled” because projects would be implemented on the basis of “necessity” and would have to go through the “national plan system,” whereby market-oriented analysis would be applied regarding their feasibility.
“For the first time, in 2017, the total revenue of the government [will] exceed the recurrent expenditure,” said Karunanayake, adding that surpluses would be put toward debt repayments. Fitch Ratings, which revised its outlook on Sri Lanka to stable from negative last month, said the country’s exchange rate could face downward pressure in the case of a shift in investor sentiment and as authorities allow for greater exchange rate flexibility. (http://asia.nikkei.com)