Policy talks were encouraging, visiting IMF mission chief Brian Aitken told a news conference following meetings with government officials.
There is scope for the government to cut recurrent expenditure and raise revenue, he said.
The revenue enhancement measures are expected to come from ongoing tax reforms which are to broaden to the tax base and to simplify the system, he said.
Reducing the budget deficit is necessary to prevent macro-economic instability, Aitken said.
"Macro-economic stability is the basis for private sector expansion."
The government is already engaged in reform of state enterprise which had been a drag on the budget.
The ultimate goal of the government is to reach a budget deficit of 5.0 percent of Gross Domestic Products and the IMF is having constant talks on how to achieve it, Aitken said.
Foreign investors look for a stable and predictable environment with tax holidays playing only a small part in attracting foreign investment, Aitken said.
"I think foreign investors are prepared to pay a reasonable tax rate. Government thinking is that it is not necessary to give large tax breaks."
The IMF program with Sri Lanka was effectively suspended by the fund in February pending better fiscal management.
The visiting IMF review mission had talks on the govenremnt budget for 2010 which authorities are planning to bring to parliament by June.
The government has said the Appropriation Bill will be submitted to Parliament on June 08 and the budget speech will be made on June 29.
source - www.lbo.lk
photo credit - http://www.imf.org
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