(Reuters) - Sri Lanka has postponed a plan to reintroduce capital gains tax by six months, a senior official said on Friday, after the move dented foreign investor sentiment.
Prime Minister Ranil Wickremesinghe last month told parliament his government would increase value added tax (VAT) to 15 percent from 11 and collect capital gains tax for the first time since 1987, ahead of talks on a $1.5-billion IMF loan.
The measures were to have come into force from the start of April.
"The implementation of capital gains tax is postponed by six months," Deputy Treasury Secretary S. R. Attygalle told Reuters on Friday. He said the increase in VAT had also been postponed.
Wickremesinghe's government has changed several revenue proposals announced in its 2016 budget in November, after meeting opposition.
The budget deficit is expected to have hit 7.2 percent of GDP in the last year, missing the target of 4.4 percent. Finance Minister Ravi Karunanayaka last week blamed the increase on the high cost of refinancing loans raised by the former government of Mahinda Rajapaksa without parliamentary approval.
On Tuesday, the central bank said Sri Lanka was planning to return to international capital markets to issue international sovereign bonds and raise up to $3 billion this year.
Foreign investors have sold 1.3 billion rupees ($8.81 million) worth of shares since Wickremesinghe's announcement.
The IMF has long called on Sri Lanka to reduce its budget deficit, raise revenues and bolster its foreign exchange reserves. These are likely to be the main conditions for the grant of the loan, economists say.
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