COLOMBO, Dec. 20 (Xinhua) -- Sri Lanka has strongly disputed Fitch Ratings' decision to downgrade the country's outlook to "negative" as hasty and inconsiderate of facts on the ground, local media reports, quoting a statement from the Ministry of Finance said here Friday.
The Finance Ministry noted that the downgrade by U.S.-based Fitch, one of the largest credit rating agencies in the world, was based on erroneous assumptions of government revenue losses resulting from recently announced wide-ranging tax reliefs.
"Taking all into consideration, the best estimate of the budget deficit would be around 5.5 percent of GDP in 2020, as against the Fitch's projection of 6.5 percent of GDP," the ministry said.
The ministry said that tax reliefs were formulated after careful study and aimed to increase demand and boost economic activity so that the country could increase it's growth rate from 2.5 percent in 2019 to over 4 percent next year.
Revenue-based fiscal consolidation would remain a priority, it said.
"What is lacking throughout the Fitch's analysis is the impact of offsetting measures that the government is undertaking to meet any revenue loss, and lack of due recognition of the favorable macroeconomic impact that such policies would deliver over the medium-term," the ministry said.
The Finance Ministry requested rating agencies to wait until the President releases a policy statement on Jan. 3, 2020 before commenting.
In November, the Sri Lankan government announced wide-ranging tax reliefs including reductions in Value Added Tax, telecommunications levies and concessions to agriculture, fisheries, livestock, IT and construction sectors.
The government has said that the tax reliefs amount to a 3.025 billion U.S. dollar fiscal stimulus.
