IMF, Arugam Bay and US warning

THE US administration had issued a warning to American tourists visiting Sri Lanka of an imminent threat of violence, terrorism and landmines. A similar warning was issued in October last year pointing to developments in Arugam Bay. But the current warning came amidst two other developments besides Arugam Bay.

- By Dr. Ameer Ali

Firstly, the IMF Mission Chief Evan Papageorgiou has been urged to remind President cum Finance Minister Anura Kumara Disanayake (AKD) that the incoming Budget must be fully in compliance with the Bank’s austerity program and it must be prepared in accordance with the program parameters. In fact, the previous three Budgets including AKD’s first complied with IMF conditionalities. If so, what prompted the Chief to issue this reminder? Was he just repeating a tradition or in receipt of information that the new Budget may set different priorities as per the Government's election promises?

Improving tax compliance, broadening the tax base and tackling revenue leakages by strengthening the tax exemption framework are some of IMF’s recommended measures. But the fund’s insistence on broadening the tax base is class biased in the sense that it falls more heavily on the poor than on the rich. Yet, despite an above expected growth rate of 4% in 2024 the economy is still not out of the woods, and IMF continues to prioritise strengthening the country’s financial stability so that the economy could sustain the level of foreign debt.

Although the Fund admits that “protecting the poor and vulnerable should remain a priority”, a promise made to voters by AKD and his team at the election, Government hands had remained tied. Hence, public investment on education and healthcare for example is inadequate, and poverty eradication is progressing only at snail pace.