Lanka poll pledges threaten fiscal targets under IMF
November 06 2019 12:08 AM
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Sajith Premadasa
Sajith Premadasa, left, Sri Lanka’s housing minister and the presidential candidate of the ruling United National Party (UNP)-led New Democratic Front alliance, hands over a copy of his election manifesto to Prime Minister Ranil Wickremesinghe during the election manifesto launching ceremony, in Kandy yesterday.

Reuters/IANS/Colombo

Sri Lanka’s two top presidential candidates are offering election giveaways, from free housing to sanitary pads for women as well as big tax cuts that officials and a credit rating agency are warning would push the country deeper into debt.
Former wartime defence secretary Gotabaya Rajapaksa and housing minister Sajith Premadasa are in a tight race for the Nov. 16 election at a time when the economy is growing at its slowest in 18 years, and its tourism industry suffering from militant bomb attacks this year.
Gotabaya has vowed to cut a 15% value added tax by nearly half and abolish some taxes, as a way to reignite consumption, but that would lead to a loss of more than Rs600bn ($3.31bn), finance ministry officials say.
Premadasa, the son of a former president, has promised free housing for all, free school uniforms and meals for students, fertilisers for farmers and sanitary pads for women, aiming to strengthen his following among the rural poor.
He has also offered to raise the threshold income for the value added tax and to reduce other taxes, raising fears that the fiscal deficit target set under an IMF programme could be imperilled under either of the two candidates.
“Unless compensated by significant revenue-raising measures, delivering on the programmes announced so far would delay fiscal consolidation and raise the risk that the government’s debt burden may rise, from high levels,” Anushka Shah, vice president at the Moody’s credit rating agency said in an email.
Sri Lanka’s fiscal deficit fell to 5.3% of the gross domestic product last year from a six-year high of 7.6% in 2015 under the $1.5bn IMF loan programme. The 2018 target 
was 4.8%.
The IMF has urged Sri Lanka to show fiscal discipline.
Premadasa is popular among the poor across all the communities for his poverty eradication policies, while Rajapaksa has gained among Sri Lanka’s Sinhala Buddhists, who account 70% of its population.
Neither candidate spelled out his revenue proposals in his manifesto.
Sirimal Abeyratne, an economics professor at the University of Colombo, said most pledges are unlikely to be 
implemented.
“This is our political culture. This is part of our self-
destructive democracy.”
But Sarath Amunugama, a former finance minister backing Rajapaksa, said the party had a plan for revenue and if needed, it would renegotiate with 
the IMF.
Harsha de Silva, economic reforms minister, said that under a Premadasa government, hopes would be pinned on greater private investment to drive growth and generate 
revenue.
The election commission yesterday said it had identified 13 presidential candidates who were in the fray merely to support either of the two main contenders, SLPP’s Gotabaya Rajapaksa and NDP’s Sajith Premadasa, for the November 16 presidential
 election, an official said.
Speaking to the Daily Mirror, election chief Mahinda Deshapriya said that his office mulled action against these candidates. “The commission noted seven candidates supporting one main candidate and six supporting the other,” he said.
When asked how these candidates canvassed for the main contenders, he said their authorised agents were seen on the two candidates’ stages. 
Besides, Deshapriya said that the secretaries to political parties represented by these candidates addressed election rallies in support of either of the two main contestants.
“The increase in cash deposit required for contesting the election and denial of registration for parties doing so will serve as deterrents,” he said.
There are 35 contestants in the fray this time, which has resulted in an unnecessary workload for the commission, 
according to the EC Chair. 
“Ballot paper will be too long this time. We need additional ballot boxes,” he added.



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