Srilanka Enters into Agreement with IMF for Tax Relief
President supported this despite his pre-election rhetoric to renegotiate with the global lender to soften the harsh conditions
Sri Lanka IMF tax agreement – Sri Lanka IMF tax – Sri Lanka private car import ban – IMF tax relief for Sri Lanka – taxscan
Sri Lanka IMF tax agreement – Sri Lanka IMF tax – Sri Lanka private car import ban – IMF tax relief for Sri Lanka – taxscan
The Srilankan President Anura Kumara Dissanayake declared that the country has achieved flexibility with the International Monetary Fund (IMF) on its rigid state revenue tax regime. As per the agreement, the import of private cars which were banned from 2020 would be allowed from February 2025.
In order to make people with higher earnings pay more and those with lower incomes pay less, the government increased the pay-as-you-earn (PAYE) tax threshold. Additional VAT exemptions and withholding tax exemptions for interest incomes for retirees were also announced.
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Due to declining financial reserves, Sri Lanka halted car imports in 2020 during the COVID-19 pandemic. The IMF permitted car imports by avoiding any negative effects on the requirement to accumulate foreign exchange reserves due to the economic improvement brought about by the IMF bailout since 2023.
On November 26, Sri Lanka declared its ratification of the USD 14.2 billion debt restructuring agreement, which requires the IMF to ensure debt sustainability through the exchange of fresh bonds for existing bonds.
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One week before, the National People's Power (NPP) government received approval from the IMF for a staff-level agreement to secure the fourth tranche of the nearly USD 3 billion bailout package. President supported this despite his pre-election rhetoric to renegotiate with the global lender to soften the harsh conditions.
When Sri Lanka declared sovereign default in mid-April 2022, its first since gaining independence from Britain in 1948, the island nation entered an economic crisis, and months of public protests caused conditions that were almost civil war-like, forcing the then-president Gotabaya Rajapaksa to flee.
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