IMF to assess Sri Lanka’s tax revisions in upcoming staff report

The International Monetary Fund (IMF) Executive Board is expected to convene in the coming months to review the staff-level agreement on the third review, under the Extended Fund Facility (EFF) arrangement between Sri Lanka and the IMF. 

IMF Communications Department Director Julie Kozack said that once the review is completed and approved by the IMF Executive Board, Sri Lanka would gain access to US $ 333 million.

In response to a question during a recent IMF media briefing regarding the Sri Lankan president’s announcement of upcoming revisions to the government tax income and other revenue measures, Kozack said that the IMF staff would include a comprehensive assessment of these measures in the staff report, which would be published following the Executive Board’s approval.

In November, Sri Lanka reached a staff-level agreement for the third review of the EFF programme, which is subject to several prior actions, primarily linked to the 2025 budget, before securing the IMF Executive Board approval.

IMF Senior Mission Chief Peter Breuer, in a briefing held in Colombo, noted that there are some prior actions, mostly related to the budget, which was delayed due to the elections. 

He noted that the IMF would be interested in convincing itself that this budget is in line with the programme objectives, so the IMF would be having very close discussions with the authorities.

At the briefing, Breuer asserted that it is important to remember who pays taxes in Sri Lanka, as it is really about the top 20 percent of income earners. The top 20 percent in income distribution is making all the tax contributions.

“The poor don’t pay taxes. If the taxes are increased, it affects a certain section of society but not the poor,” he said.