The International Monetary Fund (IMF), which is seeking funding to close the gap between government expenditure and revenue, wants a good budget and a smaller deficit from Sri Lanka, according to the IMF mission chief for the nation on Friday.
When Sri Lanka's foreign exchange reserves reached historic lows last year, the country entered the most severe financial crisis in seventy years. However, after securing a $2.9 billion IMF program in March, the country has been able to partially stabilize its economy by lowering runaway inflation and restocking reserves.
However, the nation has had difficulty increasing public revenue, and the IMF anticipates a 15% shortfall in public revenue this year. Sri Lanka needs to perform better in the coming year in order to pass the initial assessment of its loan program with the international lender.
Late on Thursday, Sri Lanka and the IMF achieved an agreement at the staff level for releasing the second tranche, totaling around $330 million. However, the Executive Board and management of the IMF must still approve the release.
Peter Breuer, Senior Mission Chief for Sri Lanka, stated that the goal for revenues is to ensure that they reach 12% of their GDP and not have a shortfall occur the next year.
Breuer told reporters during a live online briefing from Washington that they are certainly looking for a robust budget that can accomplish that, similar to how they did about a year ago, with the goal being that the difference between revenues and expenditures needs to be narrowed.
Normally, Sri Lanka finances its budget from taxes, government securities, and borrowing from state banks.
As a part of Sri Lanka's efforts to increase revenue for its state-run power monopoly, the Ceylon Electricity Board, the power regulator, approved an 18% electricity pricing increase for homes throughout the nation with effect from Friday.
During the months of February and June, Sri Lanka's tariffs jumped by 65% and 14%, respectively.
According to economists, the island's inflation rate, which was 1.3% in September, is predicted to rise to almost 5% by December as a result of the increase in electricity costs.
State media reported that after the leaders of China and Sri Lanka met on Friday in Beijing, China pledged to assist Sri Lanka in purchasing more of its commodities. This news comes just one week after the island country declared that it had struck a deal with the Export-Import Bank of China over the repayment of $4.2 billion in debt.