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CBSL decision to raise the policy rate is appropriate – IMF

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COLOMBO (News 1st); The IMF Mission in Sri Lanka says that the decision taken by the Central Bank of Sri Lanka to raise the policy rate is appropriate and in line with its objectives set under the inflation targeting framework.Peter Breuer, Senior Mission Chief for Sri Lanka, and Masahiro Nozaki, Mission Chief for Sri Lanka noted that it reflects CBSL’s commitment to the inflation target and is an important part of the disinflation strategy in the EFF program, which is fully committed by the Sri Lankan authorities and supported by the IMF.

Sri Lanka’s inflation is declining but remains at a very high level, which has been disproportionally hurting the poor, the statement added. "Upside inflation risks could reverse the trend and lead to persistently high inflation which is extremely costly to the economy," they further added.Therefore, CBSL’s decision to raise the policy rate shows its commitment to reduce inflation more quickly and firmly towards the single-digit target.

Durable disinflation would help boost market confidence, reduce excessive risk premia and ease the financing conditions for the corporates, especially the small and medium enterprises, which supports recovery.Sri Lanka is ready to adopt the IMF program within March 2023, said Central Bank Governor Dr.

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Sri Lanka’s proposed tax rates are in line with international comparison – IMF
COLOMBO (News 1st); The International Monetary Fund Mission in Sri Lanka says that efforts to increase tax revenues should be pursued in a growth-friendly manner while protecting the poor and most vulnerable. Peter Breuer, Senior Mission Chief for Sri Lanka, and Masahiro Nozaki, Mission Chief for Sri Lanka noted that it is however also important that those who can most afford it, make commensurate contributions to the financing of the necessary government expenditures. The tax package the authorities have introduced, including the new tax rate schedule for the personal income tax, helps to meet these objectives, the statement added.Peter Breuer, Senior Mission Chief for Sri Lanka, and Masahiro Nozaki, Mission Chief for Sri Lanka, also noted that the tax rates proposed under the authorities’ program are also in line with international comparison.In response to recent media questions around income tax hikes in Sri Lanka, the statement noted that Tax reforms are needed to correct this imbalance. "Only with appropriate tax receipts will the Government will be able to fund essential expenditures, and avoid further slashing of critically important outlays. These reforms will also help regain confidence of creditors," it added."The current economic crisis has a number of origins, including the government’s inability to meet government spending needs through its revenue collections.
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