ECONOMYNEXT – Sri Lanka’s stock market plunged over 1.5% within the first hour of trade on Tuesday (31) following the announcement of the Cabinet to hike taxes back to 2019 levels and the questions on what will happen next, market participants said.
The main All Share Price Index fell 1.07 percent or 154.04 points to 8,077.29 at 1130 hrs.
“It’s the overall uncertainty in the system. There are a lot of questions of the 21st amendment, do they have enough to pass it. And the budget, it is going to be very very bad also if Sri Lanka will get the IMF bailout,” a top market analyst said.
“May was a very crucial month, so as it comes to an end, there are a lot of questions of ‘what next’. The country cannot go back to its old ways.”
The most liquid S&P SL20 slipped 1.93 percent or 52.45 points to 2,666.63.
At the weekly Cabinet meeting on Tuesday, Sri Lanka announced that it will go back to 2019 tax levels to boost the country’s revenues and a supplementary budget estimate of 695 billion rupees will be presented to parliament.
Cabinet has given the go-ahead to amend the 2017 Inland Revenue Act, 2002 VAT Act, 2011 Telecommunication Act, 1998 Betting and Gaming Levy Act and the Financial Management Responsibility Act.
Sri Lanka cut taxes in December 2019 in a ‘fiscal stimulus’, saying there was a ‘persistent output gap’ after two earlier currency crises in 2016 and 2018 reduced growth.
The value-added tax was cut from 15 to 08 percent.
Market generated a turnover of 928 million rupees.
The top losers were LOLC Holdings, Expolanka and Browns Investment. (Colombo/May31/2022)