May 21, 2010 (LBO) – The International Monetary Fund (IMF) is likely to release the next tranche of its program loan to Sri Lanka in 4-6 weeks if its management and board are satisfied with the island’s budget deficit for 2010, an official said. Policy talks were encouraging, visiting IMF mission chief Brian Aitken told a news conference following meetings with government officials.
There is scope for the government to cut recurrent expenditure and raise revenue, he said.
The revenue enhancement measures are expected to come from ongoing tax reforms which are to broaden to the tax base and to simplify the system, he said.
Reducing the budget deficit is necessary to prevent macro-economic instability, Aitken said.
“Macro-economic stability is the basis for private sector expansion.”
The government is already engaged in reform of state enterprise which had been a drag on the budget.
The ultimate goal of the government is to reach a budget deficit of 5.0 percent of Gross Domestic Products and the IMF is having constant talks on how to achieve it, Aitken said.
Foreign investors look for a stable and predictable environment with tax holidays playing only a small part in attracting foreign investment, Aitken