Sri Lanka Exceeds IMF Fiscal Targets Amid Strong Tax Revenue

Sri Lanka

SRI LANKA: Sri Lanka has exceeded key IMF fiscal targets for June, driven by robust tax collections and restrained capital spending. The primary budget surplus reached US$2.85 billion, far exceeding the US$430 million target, largely due to lower-than-expected capital expenditure. Tax revenues hit US$7.15 billion against a US$5.48 billion target, supported by strong collections from excise, VAT, and high vehicle import duties. However, upcoming revenue goals are steep, with September’s target set at US$9.13 billion and year-end at LKR 14.45 billion.

Analysts caution that while fiscal metrics are strong, monetary policy risks persist. Past rate cuts have triggered currency instability, eroded reserves, and forced IMF waiver requests. Recent reserve gains partly stem from dollar-rupee swaps, which do not count toward IMF reserve targets and may create contingent liabilities. Concerns remain that the latest rate cut, coupled with strong credit growth, could hinder reserve accumulation and complicate debt repayment strategies.

Source: economynext