WB doubles support to $ 1.34b

World Bank Country Director Idah Z. Pswarayi-Riddihough and officials with Finance Minister Mangala Samaraweera

Finance Ministry said yesterday Sri Lanka will receive $ 1,340 million (over Rs. 207 billion) worth of financial and technical assistance from the World Bank Groupfor the three-year period starting from 1 Julyunder the IDA (International Development Association) Transitional Support Facility. 

Previously Sri Lanka received$ 660 million IDA support for the period from year 2014 to 2017.

Sri Lanka is expected to access approximately $ 300 m per annum for the coming three years from IBRD (International Bank for Reconstruction and Development). IDA and IBRD are member institutions of World Bank Group. Thisassistance comes as financial assistance for development projects and technical assistance for analytical and advisory services.

This was revealed when the World Bank Country Director for Sri Lanka and Maldives Idah Z.Riddihough called on Minister of Finance and Mass Media Mangala Samaraweera at the Finance Ministry on Tuesday. The World Bank Country Director discussed the progress of WB assisted ongoing and proposed projects in the country.  Public Sector Efficiency Project and the Country Readiness for Public Private Partnerships (PPP) are the two projects, proposed to be implemented by the Ministry of Finance with financial and technical support from the World Bank. The Social Safety Nets Project is the ongoing project with WB assistance.

WB Country Director Idah Z. Pswarayi-Riddihough appreciating Sri Lanka’s economic performance said that despite significant challenges,it remained broadly satisfactory in 2016 and early 2017. The WB recognises the corrective policy measures taken in 2016 following expansionary fiscal and monetary policies implemented in the previous year as early signs of stabilisation.

According to the Ministry of Finance and Mass Media, a combination of increase in revenues and rationalisation of expenditures helped reduce the fiscal deficit from a reported 7.6% in 2015 to 5.4% of GDP in 2016. While the boost received from increased profits and dividend income from State-Owned Enterprises (SOEs) played a key role in increasing revenues, the changes to the VAT Act implemented late 2016 and improved revenue administration helped strengthen tax collection, it noted.

The World Bank predicts that fiscal deficit in Sri Lanka is projected to fall to 5.2% of GDP for 2017. This is thanks to the impact of VAT changes in its first full year. In outer years, the new Inland Revenue Act is expected to expand the tax base for corporate and personal income tax while shifting from tax holidays to a performance-based incentive regime, where the incentives depend on actual rather than promised investment.

On the expenditure side, WB projects the increased fiscal space will benefit primarily public investment, assuming no major additional recurrent expenditure commitments. Under this baseline, the fiscal deficit to narrow the deficit to 3.5 of GDP by 2020. The primary fiscal balance is projected to become marginally positive in 2017, the Ministry noted.