The International Monetary Fund (IMF) is keen to see the government bringing in pension funds to the capital market in a bid to develop this sector, Dr. Brian Aitken of the IMF’s Asia and Pacific Department and head of the IMF review mission to Sri Lanka, said.
“The government is aiming to issue regulations with regard to the superannuation funds and will probably set up the regulatory body by the end of the year and we are quite keen that this be established,” Dr. Aitken told the Business Times on the sidelines of the media conference to explain the team’s conclusions on the fourth tranche of the US$ 2.6 billion SBA to Sri Lanka early this week.
He said that the economy is likely to show strong growth this year as the external balances are strong, remittance inflows continue at a high rate, tourism prospects continue to improve rapidly, and gross reserves remain at comfortable levels.
“We assessed the Central Bank’s recent rate cut as appropriate—with bank lending only slowly beginning to rebound, and economic growth still below potential, we see little sign of emerging demand-driven inflationary pressures, and average inflation for the year as a whole is expected to remain in the single digits,” he added.
“Performance under the programme has been good. End-June performance criteria on domestic budget borrowing, reserve money, and net reserves have been met. With budget revenues increasing and expenditure restraint continuing, fiscal performance so far remains consistent with achieving the government’s full-year deficit target of 8% of GDP. Financial sector reforms continue to go forward in line with the programme.”
He noted that a fundamental tax reform is needed to simplify the existing system, broaden the tax base (including by restricting concessions), spread the tax burden more equitably, and support economic growth, all while boosting the revenue-to-GDP ratio.