President Ranil Wickremesinghe said the government is aiming to introduce measures that provide bank loan concessions to support small and medium-scale industries in the upcoming budget.
"This programme is progressing steadily. We have devised comprehensive strategies to revitalize our nation's economy, engaging in discussions with both the International Monetary Fund (IMF) and our creditors," he said.
The President made this remark while addressing the National Industrial Excellence Awards last night.
"Our primary focus always revolves around our capacity to repay the loans we've taken. To achieve this, we must consistently increase our income year after year. Gaining the trust of private creditors and multilateral creditors is imperative to reassure them of our commitment to loan repayment. This commitment must be ingrained in our actions.
"A substantial portion of next year's budget will be allocated to debt repayment and interest. Failure to meet these obligations could push us back into the old, precarious situation. Therefore, safeguarding our currency and fulfilling our loan obligations is of paramount importance.
In the past, when there was a budget shortfall, the solution was to instruct the Central Bank to print more money. However, this approach is no longer legally permissible and obtaining loans from banks has also become a challenge. These restrictions stem from the informal financial practices of the past.
To ensure our financial stability in the coming year, we must significantly boost our income. We have set specific revenue targets that we must work diligently to achieve. It's crucial for the country's progress and to prevent bankruptcy in the near future.
"As a result of these financial constraints, we had to make the difficult decision to raise the VAT to 18%. This step aligns us with the practices of countries like India and Pakistan. Such decisions are never easy for any government. However, failing to take these measures would cast a shadow on everyone's future. Therefore, making the right choices becomes imperative.
"These decisions are necessary for the well-being of the country, even if they draw criticism from the public. Both my Cabinet and I have willingly shouldered the responsibility of rebuilding our nation, which had faced economic collapse.
"We made a deliberate choice not to revert to a state of dependency. Instead, we are committed to moving forward with our own strengths. Regrettably, during a Cabinet meeting held last Sunday evening, we had to make this tough decision. While some may point fingers, failing to act would risk returning to the dire circumstances of the previous year. At the start of this year, our economic growth rate was a negative 0.7%. Today, it has improved to 0.5%, with further progress expected next year. This leaves us with a fundamental choice of whether to advance or regress.
"This is the essence of leadership – the willingness to make difficult decisions and transparently convey the true state of affairs to the people. Through this decision, we can generate much-needed revenue to support small and medium-scale industries by repaying loans to banks. Without this step, these industries would face collapse, which puts industrialists in a challenging position. Thus, these difficult decisions must be made for the betterment of the country, even if they invite criticism. Our focus should remain on the nation's well-being.
"Regardless, let us embark on this journey with the resolute decision to rebuild our nation. This programme offers us the opportunity to transform our country into a prosperous one, no longer dependent on external support. I hold strong belief in the promising future of this nation. We are in negotiations with international financial institutions, including the World Bank and while the path may be challenging today, I am confident that we will reap positive results in the next two or three years," the President added.