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Sri Lanka cuts fuel prices and taxes

Staff Writer | November 2, 2018
Sri Lanka's new Prime Minister Mahinda Rajapaksa slashed fuel prices and some taxes on Thursday in what his government said were measures to encourage investment that would not undermine efforts to cut the country's big budget deficit.
Maithripala Sirisena
Asia   President Maithripala Sirisena
President Maithripala Sirisena named former president Rajapaksa as both prime minister and finance minister in recent days after sacking the unity government of Ranil Wickremesinghe and suspending parliament, prompting protests.

Announcing the fuel price and tax cuts, the finance ministry said in a statement the prime minister was of the view that "ill-conceived economic and financial policies of the previous government" had marginalised local entrepreneurs, industries and domestic production.

It said the government remained confident the 2018 budget deficit target of around 4.9 percent of gross domestic product could be achieved. The central bank warned on Tuesday that "lower than expected revenue collection is likely to challenge the achievement of the targeted budget deficit for 2018, despite the slowdown observed in expenditure."

The finance ministry said the initiatives announced on Thursday were to encourage production, simplify the tax system and help households. Changes to the tax system would encourage inward remittances and savings.

The public and businesses grumbled about tight monetary and fiscal policies and the cost of living under Wickremesinghe's government, which said it was trying to achieve fiscal consolidation under a $1.5 billion loan deal with the International Monetary Fund (IMF).