IMF team in Colombo Recommends Taxes on those earning above Rs. 40,000 per month but Prime Minister Wickremesinghe immediately expressed concern saying it could not be done as it would further increase the socio-economic crisis faced by the people

(Excerpted from the “Sunday Morning” Political Column “The Black Box” by “Capt.Vasaba)

The IMF team that was in Colombo met with Prime Minister Wickremesinghe on Monday (27 June) for another round of meetings.
During the meeting, the IMF team had expressed concerns over the delay in reaching an agreement with China on debt restructuring. The IMF has maintained that China’s agreement on debt restructuring was important since it would help Sri Lanka’s overall debt rescheduling programme.

The IMF team had also discussed some of its observations and proposals during the meeting. Some of the proposals put forward by the IMF team had been turned down by Prime Minister Wickremesinghe, who had pointed out that the people would not be able to bear them given the crisis situation in the country.

One of the main proposals that had drawn the Prime Minister’s attention was increasing the country’s tax revenue by further reducing the taxable income threshold to a level that would cover a majority of low income earners. The IMF team had noted the need to include those earning Rs. 40,000 per month into the tax net. Wickremesinghe, it is learnt, immediately expressed concern, saying it could not be done as it would further increase the socio-economic crisis faced by the people.

The Premier had also explained that it would be counterproductive to look at increasing tax revenue by burdening a majority of the low income earners as the Government would have to increase the social welfare coverage, thereby increasing public expenditure. He had added that increasing the tax burden would also increase the level of corruption in the country.

Prime Minister Wickremesinghe had therefore called on the IMF team to also look at the practical side of implementing proposals amidst a time of crisis. He underscored the importance of introducing proposals that would not be counterproductive once implemented.

Meanwhile, the US State Department and Treasury officials who were in Sri Lanka last week had also informed Prime Minister Wickremesinghe of their desire to meet with the IMF team that was in Sri Lanka. It is learnt that the US Government delegation had met with the IMF delegation on Tuesday (28 June).

The IMF team on Wednesday (29 June) met with the SJB Leader, SLFP Leader and former President Maithripala Sirisena, and a group of SLFP seniors as well.

The IMF team concluded its consultations with Sri Lanka on Thursday.

Meanwhile the finalisation of the Government’s economic recovery plan, it is learnt, is also dependent on the decisions taken during the staff-level meeting with the International Monetary Fund (IMF).

These meetings concluded on Thursday (30 June), with the IMF issuing a press release.

The IMF stated that talks had progressed satisfactorily and it would continue virtual discussions with the aim of “reaching a staff-level agreement on the EFF (Extended Fund Facility) in the near term”.

However, reading between the lines in the IMF message, it seems like the Fund will take a little more time than initially anticipated by the Sri Lankan authorities.

Courtesy:Sunday Morning