IMF standby arrangement:

Next tranche within six weeks

Proposes low budget deficit and withdrawal of BoI tax concession:

Charumini DE SILVA and Indunil HEWAGE

The next tranche of the US $ 2.6 billion International Monetary Fund (IMF) standby arrangement (SBA) will be disbursed within four to six weeks, IMF mission chief Dr Brian Aitken told the media at the Central Bank, Colombo yesterday.

Economy is likely to show a strong growth during this year, he said adding that the IMF projects a 6.5 GDP growth for the country.

“We are encouraged by the assessments for the release of the third tranche of the IMF standby facility. At present the Government is in a better position and has accomplished in rebuilding the nation in a stronger approach,” Dr Aitken said.

The budget deficit in 2009 exceeded over nine percent of the GDP, against a program target of seven percent. “However, it is encouraging to see investment flowing into the country with peace and development taking place. Therefore, the IMF is confident that the Government will achieve the target of five percent budget deficit this year,” he said.

The IMF has recommended to the Government to keep the budget deficit low and increase Government revenue. Now that the country is showing a positive trend in the economic development, the Board of Investment (BOI) should reduce concessions up to a certain amount, he said.

He said there is a good demand for various economic opportunities in Sri Lanka and the Government should take this opportunity to reduce indirect taxes and should pass on the bigger taxes to the foreign investors by reducing their concessions.

The IMF mission held talks with high profile Government and private sector officials and donor communities on performance and policies under the US $2.6 billion standby agreement approved last year.

The mission has noted the improvement of tourism prospects and the positive balance of payment and the increase in remittance inflows.