Sri Lanka says no subsidy cuts for IMF loan

July 31, 2009 (LBO) – Sri Lanka’s government has not agreed to cut subsidies such as for fertiliser to get a 2.6 billion dollar loan from the International Monetary Fund, media minister Anura Yapa said.

“We are committed to reducing budget the deficit to five percent in 2011 which is meant to help promote economic growth. The only conditions are those designed to promote economic growth – not to cut subsidies.”

If subsidies, such as last year’s 26 billion rupee fertilizer handout, are maintained, large amounts of money have to be raised from the people through taxes.

The government has also promised a subsidy to exporters, and an 8.0 billion rupee supplementary estimate has already been passed in parliament. At the moment foods such as milk are heavily taxed and others such as imported potatoes, rice, onions, and lentils are also taxed to ‘protect farmers’.

Such taxes especially hurt the urban poor.

“In the event of a revenue shortfall or expenditure overruns relative to the amounts
envisaged for 2009 under the program, we will take prompt action to contain other current expenditure—including on goods and services