The IMF has approved a loan of USD 162 million to Sri Lanka under its programme to aid the government’s reform programme which aims to promote inclusive growth. The announcement came as the Sri Lankan parliament on Friday approved its 2017 budget which aims to boost tax revenue.
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“The reinstatement of the amendments to the value added tax will help boost revenues, while the 2017 budget proposal should strengthen government finances,” the IMF said in a statement.
Sri Lanka was approved a three-year extended arrangement by the IMF in June valued about USD 1.45 billion subjected to the government’s reform programme, supported by the IMF which aims to reduce the fiscal deficit, rebuild foreign exchange reserves, and introduce a simpler, more equitable tax system to restore macroeconomic stability and promote inclusive growth.
Following the Executive Board’s discussion of the review, the IMF’s Tao Zhang, Acting Chair and Deputy Managing Director, said, “While inflation has abated, credit growth remains strong.”
The central bank indicates its readiness to tighten the monetary policy stance further if inflationary pressures resurge or credit growth persists. The authorities intend to continue building up reserves through outright purchases while allowing for greater exchange rate flexibility, the IMF said.