Minister of Finance says that there is no other option but to increase the sales tax

Mr Sabry - who is leading negotiations with the IMF as well as other lenders such as India and one of its largest creditors China - said raising taxes was just one of the difficult decisions he would have to make as talks continue over a bailout deal.

He added that the current level of VAT is “definitely not sustainable” for a country like Sri Lanka that is dependent on the imports of essentials and said the rate should be raised to 13% or 14%. Last week, China’s ambassador to Sri Lanka, Qi Zhenhong, said “China did its best to help Sri Lanka not to default but the government chose “to go to the IMF on short notice has unavoidably had some impact on the current discussions.”

The coronavirus pandemic, rising energy prices, tax cuts and rapidly shrinking foreign currency reserves have left Sri Lanka without enough dollars to pay for vital imports of fuel, food and medicine.