Dr. W.A. Wijewardena, former Deputy Governor of the Central Bank of Sri Lanka (CBSL), has warned that the government faces significant financial challenges due to its commitments to the International Monetary Fund (IMF) and the Economic Transformation Act.
He emphasized the urgent need for new taxes to meet revenue targets and avoid losing the fourth tranche of the IMF’s Extended Fund Facility (EFF) program.
Dr. Wijewardena highlighted that the government is constrained by two major factors: the IMF agreement signed by the previous administration, which the current government under President Anura Kumara Dissanayake has agreed to honor, and the requirements of the Economic Transformation Act passed just before the President’s election.
One of the key benchmarks set under these frameworks is achieving a government revenue target of 15.1% of GDP by 2025, amounting to approximately Rs. 5.5 trillion.
“That is a massive target for the government,” Dr. Wijewardena stated, adding that without new taxes, meeting this target is impossible.
Failure to do so would result in Sri Lanka losing the crucial IMF tranche and violating the provisions of the Economic Transformation Act.
He also noted that the previous government had proposed a contentious property tax to the IMF, which has since been abandoned by the current administration. As a result, a new tax must be introduced to compensate for the revenue shortfall.
“The budget cannot provide significant provisions to the people since it must stay within the constraints of the IMF agreement and the requirements of the Economic Transformation Act,” Dr. Wijewardena explained.
His remarks underscore the delicate balancing act the government must perform to comply with international financial commitments while managing domestic fiscal expectations.
