Agency. Sri Lanka’s GROSS domestic product (GDP) could fall by up to 1.5 per cent if the United States imposes a 44 per cent tax on its exports and reduces tariffs on competing trading partners, according to an International Monetary Fund (IMF) report. The United States has suspended its 44 percent tax on Sri Lanka until July 9 and is currently facing a basic 10 percent export tax.
According to the IMF, profit rates are particularly low for the garment sector, which limits firms’ ability to absorb substantial tax increases. According to the report, exports could fall by 3 percentage points of GDP due to declining external demand and volatility in trade.
The IMF said it would partially compensate for the decline in exports due to low need for imported goods, fall in global commodity prices and devaluation of exchange rates. Sri Lanka’s declining competitiveness and growing uncertainty will discourage commercial investment and undermine GDP, the IMF said.
The IMF has also warned of rising unemployment, and public pressure on the government to provide support could slow the implementation of reforms and increase the risk of poor performance of the program.
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