Budget 2017: A balance between needs of the people and catering to the IMF?

Budget 2017: A balance between needs of the people and catering to the IMF?

Budget 2017: A balance between needs of the people and catering to the IMF?

Written by Tharushan Fernando

11 Nov, 2016 | 8:14 pm

The government, through the 2017 Budget, hopes to increase tax revenue by 27 percent and gather a total of Rs.1,821 billion

According to Reuters’ reports, the budget was made in a manner that will help reach the targets set by the International Monetary Fund when providing loans to the country.

While the second installment of the IMF Extended fund facility will be released on November 20, the Executive Board of the IMF will convene on the 18th in order to finalise the matter.

On  June 3, the Executive Board of the IMF approved a 36-month extended arrangement under the extended fund facility for an amount Rs.221.85 Billion, for Sri Lanka.

According to Minister of Finance, Ravi Karunanayake, this facility was obtained to bridge the gap in the country’s Balance of Payments, which is the deficit between Sri Lanka’s exports and imports.

The IMF agreed to release this facility in seven installments.

When the loan was being approved by the IMF, a number of proposals were made by the Fund with regard to Sri Lanka’s Monetary Policy and Balance Of Payments.

Among the proposal made were:

– Implement a structural increase in revenues, facilitate a reduction in the fiscal deficit
– Reverse the decline in Central Bank foreign exchange reserves
– Reduce public debt relative to GDP and lower Sri Lanka’s risk of debt distress
– Enhance public financial management and improve the operations of state owned enterprises.

The programme aims to transition towards inflation targeting with a flexible exchange rate regime and to promote sustainable and inclusive economic growth.

The IMF presented a number of points that need to be achieved in order to achieve these goals.

These points include:

– Fiscal consolidation
– Revenue Mobilisation
– Public financial management reforms
– State enterprise reform
– Transition to flexible inflation targeting under a flexible exchange rate regime
– Reforms in the trade and investment regime

The IMF will convene prior to the second installment of the facility being released on the 20th of November, which will see 20.7 percent of the loan being released, to examine the progress of the country in achieving this goal.

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