Sri Lanka needs sensible monetary and fiscal policies: IMF report

Sept 22, 2007 (LBO) – Sri Lanka needs sensible fiscal and monetary policies and less fiscal dominance of the economy, a new report by the International Monetary Fund has said. The government is now expecting full year growth to be between 6 and 7 percent this year. The discussion paper by IMF researchers called for a reduction in current government spending, trimming the budget deficit and channeling more money to investment.

Fiscal Dominance

The report came as awareness was growing with the island about the way the non-state sectors were being taxed heavily to support the tax-free lifestyle of state workers and politicians.

In the first five months of the year 57 percent of every tax rupee went to pay the tax-free salaries and pensions of state workers, according to official data.

State workers are also to be issued 28,000 tax-slashed cars and low interest housing loans at rates as low as four percent, even as the budget deficit sent market interest rates to 18 percent putting mortgage loans beyond the reach of most Sri Lankans who want to build or buy homes.

Economists have pointed out that public sector dis-saving indicated by a curre