Former Deputy Governor of the Central Bank of Sri Lanka (CBSL), Dr. W.A. Wijewardena, has highlighted the government’s difficulties in achieving its revenue target of 15.1% of GDP this year due to constraints imposed by its agreement with the International Monetary Fund (IMF) and the Economic Transformation Act.
Dr. Wijewardena stated that the government may need to introduce new taxes to meet these revenue benchmarks, ensuring the release of the fourth tranche under the IMF’s Extended Fund Facility (EFF) program.
“The government of President Anura Kumara Dissanayake is restricted in its budgetary policy by two key factors beyond its control. One is the loan agreement signed by the previous administration with the IMF, which President Dissanayake has committed to implementing without amendments,” he said.
“The second constraint is the Economic Transformation Act, passed just before the new President took office. This legislation mandates specific benchmarks that must be met in preparing the 2025 budget,” he added.
A major requirement under both the IMF agreement and the Economic Transformation Act is for Sri Lanka to generate government revenue equivalent to 15.1% of GDP in 2025—approximately Rs. 5.5 trillion. Dr. Wijewardena described this as a “massive target” and emphasized that new taxes would be necessary to achieve it.
“If the government fails to meet this revenue level, it will not receive the fourth tranche from the IMF and will also be non-compliant with the Economic Transformation Act,” he warned.
He further noted that a previously proposed property tax, which had been included in negotiations with the IMF, has been abandoned by the current government. As a result, an alternative tax must be introduced to offset the revenue loss.
“Given these constraints, the budget will have limited capacity to provide substantial benefits to the people, as fiscal policy must remain within the IMF framework and the limits set by the Economic Transformation Act,” Dr. Wijewardena concluded.
