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Govt. ready for prudent economic management following successful debt restructuring: Prez

19 October 2022 09:39 pm - 34     - {{hitsCtrl.values.hits}}


The Government is ready to implement prudent economic management after successful debt restructuring, President Ranil Wickremesinghe said today.

He said this delivering a special statement on tax policy today.

President Wickremesinghe further noted that it was not possible to strengthen the economy without increasing the revenue of the country, which will compel him to reluctantly make tough decisions in order to rebuild the nation.

The full statement by President Ranil Wickremesinghe is as follows:

An important step in Sri Lanka's debt restructuring program took place last week.

A team under the Minister of State for Finance participated in the Annual (October 07) meeting of the International Monetary Fund (IMF).

In that instance, a meeting was convened by the IMF, with the lending and international private institutions to Sri Lanka.

Over 75 persons participated both in person and through zoom technology. The main objective of this meeting was for the three main countries that have granted loans to Sri Lanka, namely Japan, China and India, to come together on a common platform to discuss the future steps in the formulation of concessions.

During this meeting, the IMF and Sri Lanka pointed out the need for a common platform.

India and China have informed that they will examine the issues further and respond accordingly.

These two countries have also informed the possible need for bilateral discussions in this regard. Many other countries also participated in this meeting, including the attendance of an Assistant Secretary of the United States Treasury.

All this was possible due to the implementation of the decisions taken in consultation with the IMF.

There is an aspect about the income of the Government of Sri Lanka which need to be noted. In 2015, during a visit to Sri Lanka the IMF representatives underlined the need or a surplus in the primary budget.

Therefore, it was provided for in 2017-2018. However, it was reduced in 2019 due to the Easter Sunday bombings.

However, there were no serious repercussions. The IMF was optimistic that Sri Lanka would be able to increase its revenue, since there was a surplus in the primary budget.

At that juncture, Sri Lanka’s income was between 14.5% - 15% of the Gross Domestic Product (GDP). However, it was agreed that Sri Lanka could gradually increase this to 17%-18%. However, in November 2019, the country’s taxes were drastically reduced, with the Government revenue decreasing to 8.5%.

In this context, the IMF set aside the agreements and declared that it was unable to provide the agreed assistance.

That year the Government lost approximately Rs. 600-700 billion as revenue. Simultaneously, the country had to face the Covid-19 pandemic.

These issues are the main factors that led to the collapse of Sri Lanka's economy.

The IMF advised the need for a surplus in Sri Lanka’s primary budget. It was agreed to, since the country needs the support of the IMF.

It was also decided to increase the country's income from 8.5% to 14.5% of the GDP.

However, it is a difficult task to accomplish immediately, it is envisaged to achieve this by 2026.

Initially, a decision had to be taken on the manner in which the income is to be increased. Money was printed due to the decrease in income.

During the past two years, Rs. 2300 billion has been printed, resulting in inflation rising to 70% - 75% and even more in respect of food inflation.

These increases need to be controlled, while securing income. Therefore, during the discussions with the IMF a new tax system has been proposed.

The IMF informed that even the export industries would be required to pay taxes. The IMF pointed out that in countries with an export economy, the related industries were liable for tax.

The IMF also upheld that Sri Lanka’s primary export economy is based on the plantation industry. During British rule, taxes were charged from every plantation sector, including tea, coconut and rubber.

Therefore, if the country has to move towards that goal, taxes will have to be paid. The export sector has now questioned this aspect and the related concerns are to be submitted to the IMF.

The second issue regarding the personal tax structure. The majority of tax revenue is through indirect taxation.

The majority of the country’s citizens, even those below the poverty line, had no choice but to pay indirect taxes. The direct tax revenue is 20% and 80% has been derived from indirect taxes.

The IMF that particularly had reservations in this regard were of the view that the amount of tax obtained through direct taxes should exceed 20%.

The IMF noted that otherwise this would not be successful and ordinary citizens would need to pay taxes.

Therefore, according to this framework, and also to achieve the goals of 2026, the Treasury and the IMF discussed the possibility of limiting the taxation from those who have an income of Rs. 200,000, which however, did not materialize.

Eventually, this has resulted in the decision to levy income tax on people earning over 100,000.

Today, this has become a vital concern amongst the citizens. Against this backdrop, without this tax system, the desired goal will not be achieved.

The agreed goal is to achieve 14.5% - 15% of Gross Domestic Product (GDP) revenue by 2026. If Sri Lanka withdraws from this program, IMF assistance will not be received.

Without IMF certification, the support of these international financial institutions such as the World Bank, Asian Development Bank, and the countries that have supported financially will not be forthcoming.

If that happens, the country will be back to the era of queues. Tougher times ahead will have to be faced. Therefore, these loans need to be obtained and embark on a debt-restructuring program.

These decisions are not being taken wilfully, but are being done reluctantly.

However, these decisions will be reconsidered periodically. In the same manner of conducting the debt restructuring program successfully, if a bountiful Maha season is achieved as expected, it will help in reducing economic pressure.

Measures to increase the country’s foreign reserves has also been discussed and once all these steps have been implemented the country can move forward.

The country at this juncture is facing a difficult period. Expectedly tough decisions have to be taken during these difficult times.

I undertook this challenge when no one else was willing to come forward. Therefore, it is my responsibility to explain the background of the related issues and the Government is also ready to discuss this further if required.

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  Comments - 34

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  • Sam Wednesday, 19 October 2022 10:08 PM

    Tax our salaries but leave our savings alone. We've worked hard for those and they have already lost half of their real value due to crap government policies. You wouldn't have to print so much money if you didn't pay all those public sector wasters. Sort that out first rather than have us pay for them.

    Kd Thursday, 20 October 2022 07:40 AM

    Yes 100%. Its double taxation to tax savings and fixed deposits. Completely unfair.

    Sri Lankan Wednesday, 19 October 2022 10:27 PM

    Dear President RW WE do appreciate your hard and Intelligent work. Please do do tax all Temples, Churches, Mosques etc who earn and have money should pay taxes for the country.

    Arnold Thursday, 20 October 2022 10:33 AM

    They steal and we pay!! Do something to stop the massive theft of government coffers by politicians, their family, cronies, supporters, etc etc.

    Curious Wednesday, 19 October 2022 10:46 PM

    Sir, the talk with numbers looks good but what are your plans to punish the people who brought the country to the present state. Should the citizens pay for politicians folly.

    Dana Thursday, 20 October 2022 12:32 AM

    Nothing on how we got into this mess ( except for the 2019 tax reduction). Instead of merely taxing everyone above 100K, why can't you enquire into the huge black economy in the country, including those named in Panama papers, Air bus deal etc. etc. and take steps to collect their fair share of taxes.

    Jinthipala Gonasinha Thursday, 20 October 2022 01:33 AM

    Yes, we believe you! We remember that you did (KORA) since 1970s!! Results can be seen today!! Donkeys are still there to believe you - Boru Kabaraya - Satan Putraya - unwanted, rejected and refused man elected by 134 crooks now most are against!!

    Roshan samarathunga Thursday, 20 October 2022 03:01 AM

    Yes indeed unelected president took tough decisions for over 50 years. Unfortunately nothing done moving forward the beloved nation. He loves master debating in front of the speaker. Now he has got nothing left to offer. Please stay at home be immortal.

    Demuni de Silva Thursday, 20 October 2022 06:40 AM

    Mr. President, have a forensic audit of finance utilization since 2005 to-date. Besides, please see the possibility in reduction of composition to 120 educated with the knowledge of at least two languages out of Sinhala, Tamil

    Robin Banks Thursday, 20 October 2022 06:54 AM

    You used two words that should not be in your vocabulary. "Prudent" and "successful," . Please refer dictionary before usage.

    Sunil Thursday, 20 October 2022 06:56 AM

    Debt restructuring is a long way off, if at all the creditors agree. On assumption of office this moron said that the two or three weeks that follow would be extremely tough. Now months have passed and the misery and troubles of the people have increased many fold. Who is he trying to deceive?

    Gehan Thursday, 20 October 2022 07:06 AM

    Instead of punishing the down trodden people of this country. Start by first cutting out the Govt waste, unproductive workers and streamlining services. The people will appreciate this as many things can be implemented to reduce the overburdened tax payers.

    lion Thursday, 20 October 2022 07:09 AM

    fools can expect wonders from this man who has been in the parliament for nearly 45 years out of which 6 times as the priminister. Now not the people but the 134 goons in the parliament brought this person in as the head of this failed state but idea behind is not the development of the country but to save them from the wrath of the angry masses.

    Hubert Congreve Thursday, 20 October 2022 07:30 AM

    Ranil rather than taxing the poor masses, try to recover all the looted money from Mahinda, Basil and Namal.

    Russel Harmmer Thursday, 20 October 2022 07:33 AM

    We hate to hear bull shit stories from you Mr. President, as long as you protect Rajapakshe family and be a slave to them you cannot achieve your targets. Get out from your slavery life first and act wisely.

    Meera Thursday, 20 October 2022 07:35 AM

    Loading too much of taxes on the poor masses will lead you (Ranil) to disaster, even you may have to lose your life - mind it.

    Prof. A.R.C. Fernando Thursday, 20 October 2022 07:37 AM

    Without squeezing the innocent public, find ways to recover robbed wealth from Mahinda, that is more than enough to feed SriLanka for decades.

    Dee Thursday, 20 October 2022 07:53 AM

    We will be starting Aragaley II and somehow block your plans to take SL off this mess. We don't care about solving this crisis. We want elections to appoint something as president! Because this country is facing the 'Economic Armegedon'!

    C Fernando Thursday, 20 October 2022 08:07 AM

    Why are you only looking at increasing the revenue side by taxing the already suffering public? You are doing nothing to reduce costs by cutting back on government expenditure. Instead you are appointing more useless state ministers who only increase government expenditure along with those inefficient public sector workers. You are increasing our taxes to meet that cost. The IMF can see this. We will get nothing from them.

    sampanditha Thursday, 20 October 2022 08:34 AM

    Pls share with us the details of the SUCCESSFUL DEBT restructuring you achieved. You say significant money printing in the past was bad. Did you mention a word of protest about this when GOTA was President. While introducing heavy taxes on the public, the other important issues, cutting the 11% GDP defense budget, funding your 38 dep ministers did not come as an option to save us??

    Michael Thursday, 20 October 2022 08:34 AM

    Instead of getting rid of the excess staff and political appointees in the Govt and State sectors, the easiest action is to tax so that the Govt does not get too unpopular. Loss making Srilankan Airlines continues to be a drain on the economy. Also, every few weeks the heavily bloated armed service staff are promoted ( buying loyalty) as a form of protection, when there are protests by the citizens.

    joshua Thursday, 20 October 2022 08:59 AM

    first get rid of the corruption in the Government sector and also get rid of the robbers and murderers from the Parliament. You seem to be only concentrating on increasing the taxes when people are facing hyperinflation with money having no purchasing power. How can people survive when you do thinks like a bull in a china shop. This country will never prosper unless and until you get rid of the corruption and wastages. Have you taken action to get back the money from the bond scam, Rajapakshes, Nadesan and so forth. Nothing.

    Mizaru Thursday, 20 October 2022 09:01 AM

    You are not elected by the people. You are a proxy for Mahinda and Namal. You efforts with the IMF and the International community has failed. Just get out. We need a fresh mandate to steer Sri Lanka at this juncture.

    Kps Thursday, 20 October 2022 09:07 AM

    Mr. President, are we giving up the collection of all looted Money? Is our Srilanka is a heaven for thieves. We lost nearly 15 billion due to poor economic strategies. Any way we can collect those ? I am puzzled. Hope you are not protecting any friends like our old president.

    Jude Thursday, 20 October 2022 09:40 AM

    Fifty years and counting SL successive governments never had prudent economic management!! Period!! That's the very reason SL went Bankrupt!! Yeah!!

    johan Thursday, 20 October 2022 09:59 AM

    This he must start from Parliament .SL such a small country recently appointed 36state ministers when country is bankrupt.The maintenance exp.of them will run into millions.Already 700 billion lost after 2019 due to wrong economy policies of Mahinda,Lakshman,Basil and Cabraal.We d'not know any clause in IMF agreement to increase only taxes but not to cut down wastage.This is the reason Aragalaya is demanding People's council outside parliament to go into the malpractices done by the politicians and Govts.

    Patriot Thursday, 20 October 2022 10:02 AM

    President said 2300 billion printed, first take them to custody for misappropriation and take the ministers who gave appointments to their goons and supporters to get into public sector by over staffing, do a proper audit on all public sector institutions and retain only required carder then revise the tax. The citizens who slog for 12-14 hours a day and earn cannot be looted to feed the excess staff. In fact president him self doing that by appointing advisers from his party members who loyal to him. The private sector must put the foot down and say "we cannot pay taxes !!! "

    Premalal Perera Thursday, 20 October 2022 10:37 AM

    Prudent economic management means finding money for the next set of crooks from his party. Just wait for an election.

    Punchi Thursday, 20 October 2022 10:44 AM

    The population of UK is 69 million and a standing army of 90,000 including Gurkhas, Fijians etc. Our failed paradise had a population of 22 million with a standing army of 330,000. There are many unproductive sections of society like our monks on state stipends etc. we have a bloated and u Inefficient bureaucracy. We have developed a dependent cargo cult type overseas aid and grants type mentality. What ever is said we are perpetually doomed to impoverishment and poverty

    Ravindu Thursday, 20 October 2022 11:14 AM

    Defence budget is far too high and no doubt this needs to be cut by 70%. we are wasting Human Resources on this sector by being not productive i.E do nothing and can be invested in other sectors like manufacturing, farming, fishing, infrastructure development, cleaning, foreign employment. Tax payers shouldn’t be burdened for such a waste

    Damian Thursday, 20 October 2022 11:22 AM

    You keep muttering about so many changes however your actions only indicate that you're ready yo loot the country together with the Rajapakse's. Stay at home and watch Netflix please you've done enough damage to this country with your failed policies. So the private sector has to pocket out everything to maintain this pathetic parliament and public sector.

    Damian Thursday, 20 October 2022 11:32 AM

    How come anyone doesn't talk about reducing expenditure. Do we need a Jumbo Cabinet and Ministers who contribute absolutely nothing for the country. We should not accept this rubbish from the rogue President until he provides a plan to reduce Govt expenditure. Also how about recovering looted money ?

    Lanka School of Economics Thursday, 20 October 2022 12:14 PM

    Of course with more taxes queues can be avoided. People will have less money in their hands after the payment of taxes. Even if goods are available people won't have the money to buy and therefore no queues. IMF theory is simple. Ask your people to pay for the stolen wealth, because it's they who elected them. So the ball is in their court.

    s.sivarajah Friday, 21 October 2022 05:01 AM

    You have extended your cabinet to stay in power. Use them properly and get rid of those who cannot help the countries economy. Those who cannot contribute but lnsisting on enriching themselves need to be first named and fired from their jobs

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