In a recent statement, the Senior Mission Chief for Sri Lanka at the International Monetary Fund (IMF), Peter Breuer, underscored the necessity of taxation to fund essential government services. He emphasized that if citizens wish to continue benefiting from common goods, they must contribute proportionately through taxes. Breuer’s remarks come amidst Sri Lanka’s ongoing economic crisis, with the IMF indicating that the current tax burden is likely to persist for the foreseeable future.
Breuer highlighted that Sri Lanka has experienced a significant decline in real incomes, with the country witnessing a notable reduction in economic activity, equivalent to one-sixth of its GDP in dollar terms between 2022 and 2023. He attributed these hardships to the government’s financial constraints, resulting from insufficient revenue sources.
The IMF official noted that Sri Lanka’s general revenue has dwindled over the years, with figures in 2022 representing only a fraction of what was collected in the 1980s. Comparatively, Sri Lanka’s revenue generation falls far below that of other emerging market countries, averaging around 9-9.5% of GDP between 2019 and 2022, whereas similar nations achieve rates closer to 26%.
Acknowledging Sri Lanka’s commitment to fiscal reforms, the IMF stressed the importance of continuing progress in introducing property taxes and implementing revenue measures to meet mobilization targets beyond 2025. Additionally, efforts to enhance revenue administration and combat corruption are deemed essential, alongside maintaining cost recovery in fuel and electricity pricing to mitigate fiscal risks associated with state-owned enterprises.
Breuer’s remarks reflect the IMF’s stance on Sri Lanka’s economic challenges and the necessity for sustained fiscal measures to navigate through the crisis effectively.
