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Economy improving, VAT can be reduced – RW

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Speaker Mahinda Yapa Abeywardena and Secretary General of Parliament Kushani Rohanadeera escorting President Ranil Wickremesinghe to the main chamber of Parliament yesterday. (Pic by Nishan S. Priyantha)

President Ranil Wickremesinghe said in Parliamenty yesterday he was aware that Value Added Tax (VAT) was a burden on the public. He said it would be possible to reduce VAT with the passage of time.

Delivering the government policy statement at the commencement of the new session of Parliament, the President said: “The prior scarcity of paper for book printing is now replaced by discussions about VAT. Indeed, VAT poses a burden for many, and we are not oblivious to this fact. We are systematically addressing this issue. In 2022, there were 437,547 registered tax payers, a number that surged to 1,000,029 by the end of 2023—an impressive 130 percent increase. As the tax network expands, the burden on individuals and organizations will diminish. Continuing our economic reforms, we aim to alleviate the tax burden as the economy stabilizes. There is also room for a potential revision of the VAT percentage.

The President’s statement: From ancient times to the present day, our world has encountered a myriad of crises, spanning nations and personal lives alike. While some crises could be overcome, others proved insurmountable. Mere condemnation and blame-shifting towards the crisis itself and not moving beyond scrutinizing its root causes are not effective means of resolution. Successful crisis management, whether on a global scale, within nations, or in individual lives, hinges on adeptly handling the situation and navigating through it.

Reflecting on the timeless wisdom of Lord Buddha’s sermon, ‘Attadeepa – Viharati’—be a lamp unto you—we find a profound lesson. Initiating the process of overcoming a crisis must begin within oneself. Throughout history, no crisis has been conquered solely through pointing fingers at others.

It is imperative that we become the guiding light for our own selves, correcting our thoughts and perspectives. Without personal improvement, there can be no collective good for our country, and the crisis remains unsolved. True systemic change can only occur when we, as individuals, undergo transformation, transcending mere pronouncement about altering the system.

In emphasizing this principle, I aim to present several key insights about our past, our present, and the future we aspire to achieve, before this august assembly.

The memory of the state our country found itself in during February 2022 is still vivid in our minds. However, as of February 2023, commendable efforts have led to a considerable improvement in the country’s condition, surpassing the state it was in during the same month the previous year.

Allow me to highlight the key economic indicators from February last year up to now:

Inflation, which stood at a daunting 50.6 per cent last year, has dramatically decreased to a mere 6.4 per cent today.

Food inflation, previously at an alarming 54.4 per cent, has seen a remarkable decline to just 3.3 per cent.

The exchange rate has shown positive movement, with a dollar worth Rs. 362 in the past and now valued at Rs. 314.

Despite a 3.7 per cent budget primary deficit in 2022, we achieved a significant turnaround in 2023, achieving a primary budget surplus. This marks the sixth instance of Sri Lanka achieving such a surplus in the 76 years since independence. In 2022, the balance of payments deficit was 1.9 per cent of GDP, but by the end of 2023, the country achieved a surplus, a milestone not seen since 1977.

The interest rate, which was a high 28 per cent in 2023, has notably dropped to 12 per cent.

The 52 main statutory bodies of the government, facing a loss of Rs. 745 billion by the end of 2022, turned a profit of Rs. 313 billion by September 2023.

It is noteworthy that these institutions are suffering from a huge debt burden. On April 12, 2022, Sri Lanka declared its inability to pay its debts, with foreign exchange reserves hitting zero. The current situation is vastly improved, with foreign exchange reserves standing at $4.4 billion by the end of December 2023.

In a brief span, our strides in tourism have been noteworthy. The tourist arrivals for 2022 was 194,495, a figure that soared to 1,487,303 in 2023, with over 200,000 tourists arriving in January this year.

Throughout 2023, we implemented several positive measures, including lifting the fuel limit imposed by the QR code. Continuous electricity supply is now ensured, no gas shortage, the agriculture sector faces no shortage of fertilizers and there is no shortage of fuel for fisheries community. Import restrictions for all goods excluding vehicles have been eliminated, enabling the seamless importation of essential food and medicine. Furthermore, there are no shortages in the supply network for raw materials crucial to manufacturing industries.

Despite a 7.8 per cent contraction in GDP by the close of 2022, our economic trajectory reversed. Experiencing six consecutive quarters of growth from 2022, the third quarter of 2023 marked a 1.6 per cent expansion.

Our economy, initially plummeted with unprecedented speed, has undergone a remarkable turnaround at rocket speed, resembling a V-shaped recovery igniting hope. It can be recognized as a significant achievement. The recovery of collapsed economies is typically fraught with prolonged challenges and hardships. Nevertheless, unlike other nations, we have managed to rejuvenate our economy swiftly, evading enduring difficulties and pains.

The economic downturn persisted throughout 2022, making notable economic progress in 2023 not a random occurrence. This progress was a deliberate outcome of implementing a nuanced economic policy crafted with meticulous care and foresight.

I consistently communicated the policies, measures, and plans we formulated, openly addressing this Parliament and the public on various occasions. Every step was taken with transparency, providing opportunities for discussion and debate both inside and outside Parliament, leaving nothing concealed.

My decision-making was driven by the country’s growth, not political gain. Even when facing disadvantages, decisions in favour of the country were not shied away from. While certain groups in the parliament opposed these decisions, the majority, regardless of personal political motives, supported them for the benefit of the country. I am confident that, in time, they will be acknowledged and appreciated by the people.

Our journey progressed methodically. In the 2022 interim budget, I highlighted the country’s critical situation at that time, aiming to avert an economic collapse. Through the 2023 budget, several proposals were presented to guide the economy towards stability, showcasing a step-by-step approach to our overarching goals.

The 2024 budget proposals mark the initial stride in essential reforms aimed at propelling economic development. Despite challenges and occasional reluctance, the economic reforms and policies we have instituted have set us on the trajectory towards a stable economy, earning recognition from international financial institutions for our targeted approach.

Having emerged from a dark economic abyss, we now perceive the light at the end of the tunnel. The economy, once in the intensive care unit, has been rescued from its critical condition.

The severe economic crisis of the past subjected many citizens to unimaginable hardships—job losses, income source depletion, missed business opportunities, and disenfranchisement, most acutely felt by the common people. Presently, we are gradually restoring lost opportunities through initiatives like the Urumaya programme, aiming to reinstate people’s rights.

Under the “Urumaya” programme which was initiated day before yesterday, we focus on two fundamental objectives. One is lands and the other is housing.

The British colonial government, through the Waste Lands Act in 1897, deprived people of their land rights, a grievance unaddressed by subsequent post-independence administrations.

We have initiated the process of granting them land rights, which is set to benefit over two million people.

Enlisting two million new landowners into our society marks a historic and a revolutionary stride—an honour to the enduring struggles of farmers striving for self-sufficiency in rice production.

Approximately one-third of our country’s populace faces insufficient income and lacks suitable housing. Our commitment involves taking measures to provide these individuals with both income sources and a legacy of housing.

Complete ownership of more than 50,000 houses will be granted for low income urban residents.

Launching onto a successful economic development path demands special attention to all regions of the country, especially for poor and vulnerable communities. Despite facing a severe economic crisis, we have consistently taken steps for the welfare of our citizens.

This year, Asvasuma is expected to benefit 2.4 million people, aiming to uplift the living standards of those at the lowest socioeconomic levels. The unprecedented financial subsidy accompanying this program stands as a historic milestone in our country. As a means of assistance to low-income individuals, each family will receive 20 kilos of rice during the festive season of this year.

As of August 2022, the President’s Fund was non-functional, leaving over 9,000 pending applications for medical aid. An additional 4,000 applications were received from August to December. We addressed the backlog, disbursing Rs. 915 million to 4,917 patients throughout 2023. Now, payment processing time has been significantly reduced, with payments made within three to five working days. Efforts are underway to increase all medical aid from 50 to 100 percent this year. Alongside these benefits, a scholarship program for school children has been implemented through the President’s Fund.

Pensions have been raised while the government employees are provided with a specialallowance, and steps are being taken to resolve the salary discrepancies for government retirees from 2016 to 2020 in the near future.

As government revenue increases, we will take measures to increase benefits for the people accordingly.

The tangible growth we are experiencing is evident in the current societal discussions. Not long ago, conversations cantered around the challenges posed by power cuts, demanding uninterrupted electricity. Today, the discourse has shifted to electricity bills. Previously, concerns were raised about the exorbitant black market price of petrol, with talk of spending days in fuel queues. Now, the focus is on new oil companies investing in Sri Lanka. Issues related to the scarcity of vegetables have transformed into discussions about prices of carrots.

All these endeavours are undertaken amid a substantial debt burden. Throughout the past, concerted efforts have been made to formulate a strategic plan for repaying this debt. The domestic debt restructuring plan has been successfully executed as the first step, and a policy agreement for restructuring has been reached with foreign creditors as the second step.

Negotiations with private creditors are presently in progress.

Anticipated in the initial six months of this year, the intricate restructuring plan is poised to form the foundational framework for restoring our economy to normalcy. It will serve as a pivotal juncture in alleviating the burden of debt.

Projections from the IMF, World Bank, and Asian Development Bank suggest a potential 2% to 3% economic growth for this year, and our efforts are geared towards elevating this to 5% by 2025.

In 2021, we initiated operations to rescue the country from impending challenges, with 2022 surpassing some aspects of the preceding year. Every facet of 2023 exhibited improvement over 2022, and 2024 is forecasted to be even more promising. While progress continues on this trajectory, we aspire for a more remarkable 2025.

However, contentment with this progress alone is not sufficient. Despite not currently repaying any loans from foreign countries and external commercial bases, the impending restructuring signals a shift towards debt repayment. To fulfil these obligations, both rupees and dollars are essential.

By September 2023 our total debt burden was US $ 91 billion. It will take a considerable period of time to settle this debt. In order to meet our debt, we need to source the funds locally. It is imperative that we generate this income; otherwise, we risk falling into the debt trap once again.

As a result of debt restructuring, we will be able to reduce the annual payment. Nevertheless, even under such a situation we will still have to pay around US$ 03 billion per year. We cannot continue to be paying in this manner. We need to create a balance between our income and expenditure. Our budget deficit is at an acute stage. This year government revenue stood at Rs. 4,127 billion and expenditure was Rs. 6,978 billion. Out of this Rs. 2,651 billion is for debt repayment. This clearly indicates our debt burden.

Since the 1950s, our approach involved extensive borrowing, encompassing all aspects of governance. Leaders and the populace became accustomed to this debt-centric economy, with concessions provided on various fronts, including free rice distribution, subsided electricity bills, educational endeavours, and the proliferation of government jobs. Promises made during elections were diligently fulfilled upon assuming power.

We must break free from the shackles of a debt-driven mentality to secure the future of our country.

The elimination of the debt economy is paramount, and we need to focus on building a robust, independent economy.

Rapidly increasing export income and foreign investment are crucial components of this transformative journey.

Our on-going economic reforms lay the foundation for creating a competitive, digital and green economy.

Central to this process are the eradication of corruption and social modernization.

While corruption is widely acknowledged as a scourge in our nation, it's crucial to recognize that a systematic and formal set of rules is essential to combat it. Shouting about catching thieves is ineffective without a strong legal system and a scientific approach, executed by trained officers.

Merely bringing corrupt individuals to justice is not a comprehensive solution; prevention is equally critical. Strict rules to deter corruption and severe punishments for offenders must work in tandem.

The enactment of the Anti-Corruption Act is a significant step in this direction, and its impartial implementation is evident for all to see.

I would like to draw the attention of this House to key areas of focus in our economic and social modernization efforts.

Tourism is a sector ripe for development, and we are actively working on enhancing both human and physical resources to attract more tourists, with the goal of reaching 5 million visitors annually.

Our country boasts abundant renewable energy sources, presenting a significant opportunity for economic gain.

While agriculture has been a longstanding focus, out-dated methods persist, hindering modernization.

We are launching a program to double and triple of productivity agricultural land in the dry zone over the next three to four seasons. Policy decisions have been made, and the program will commence this month, starting with one divisional secretariat selected from each district.

This initiative aims not only to boost productivity in the dry zone but also to free up wet zone land for other commercial crops.

Hundreds of thousands of acres acquired under the Land Reform Commission in the seventies remain unproductive, leading to a significant waste of resources. Various government agencies, such as Janavasama and State Plantations Corporation, own these lands, with billions of public funds spent on maintaining them.

To address this issue, we have devised an effective plan, leasing these lands to localentrepreneurs for long-term commercial cultivation, including the option for foreign technology and investment. This strategy aims to transform underutilized lands into sources of foreign exchange, contributing to economic development.

The Guest of Honour at our Independence celebrations was the Prime Minister of Thailand who spoke about the agricultural revolution in his country. Inspired by the agricultural revolution in Thailand, where modern technology is effectively utilized, we seek to enhance productivity in agriculture and generate foreign exchange.

Another crucial focus is on attracting foreign investment to accelerate economic growth.

Recognizing the challenges faced by foreign investors in Sri Lanka, we have formulated a comprehensive plan to simplify the investment process, eliminating bureaucratic hurdles and corruption risks.

Efficient processes for permits and facilities in some countries are completed within two or three days, covering aspects such as land, electricity, water facilities, and access roads.

Utilizing computer systems ensures a transparent and legal process.

Building on these international standards, the groundwork for establishing an Economic Commission aligning with current needs is now completed. This commission oversees a comprehensive set of investment laws and programs.

Education and Health are vital focus areas, which needs our attention. Out-dated laws from the 2nd World War era no longer meet the needs of the modern world. To address this, new practices and regulations, aligned with international standards, are being introduced for education and health. The goal is to modernize these sectors, ensuring the protection of vulnerable sections and fostering economic growth. Overcoming the challenges of the twenty-first century is imperative.

Therefore, drawing from international experience, we must introduce new practices and rules in education and health. It is crucial to nurture human resources in a manner aligned with the modern environment. We are actively working on a comprehensive modernization strategy in these sectors to safeguard the interests of the poor and vulnerable while promoting economic growth.

Specifically, immediate implementation of educational reforms is necessary. The future heavily relies on new technological knowledge, requiring us to create a generation proficient in information technology, artificial intelligence, etc. In pursuit of this goal, we are formulating a policy to offer university education to every high school graduate and establishing science and technology universities. Additionally, a practice is being established to provide vocational education to those not passing the ordinary and advanced level examinations.

We are laying the groundwork to nurture a new generation equipped with contemporary knowledge and technology. As an island nation, we must execute a program ensuring the security of our country. All safety networks in the country are undergoing modernization. Intelligence agencies, security equipment, training methods, troops, defence equipment, and strategies are being revamped to effectively address various challenges that may arise.

It is imperative to reassess our foreign relations in light of current needs and geopolitical trends. The restructuring of our foreign relations should prioritize leveraging economic potentials. Therefore, adopting new foreign policies that enhance the country's economic strength and fostering non-aligned policies and friendships with all states are crucial. The directions of our foreign policy is evolving to align with the contemporary era.

Furthermore, efforts are underway to establish a new network of economic relationships that facilitate our products' entry into foreign markets. The goal is to forge free trade agreements with numerous countries. Notably, a recent free trade agreement was signed with Thailand, steps are being taken to enhance the trade agreement with India, and the free trade agreement with Singapore is fully operational. There are also plans to pursue a free trade agreement with China, Indonesia and Bangladesh in the future.

Similarly we will join the Regional Comprehensive Economic Partnership (RCEP). We will connect with the common system of trade variations in the European Union.

Modernizing various fields has yielded positive outcomes, elevating the standard of living for people in the country. The goal is to establish harmony and social justice through the successful implementation of programs that distribute benefits equitably across all sections of the country.

We emphasize the need for a shift in our economic focus, which is currently centred around Colombo and the Western Province. Currently, 46 per cent of the country's economy is concentrated in the Western Province.

This has to change. To address this, we are implementing a strategic plan to broaden economic activities in cities like Jaffna, Trincomalee, Bingiriya, Hambantota, and Kandy. A program has already been initiated to develop Trincomalee as an economic hub in collaboration with India.

Efforts are underway to bolster the economies of all nine provinces, with delegated powers related to sectors like vocational education and agriculture given to provincial councils under the third list of provincial council powers in the constitution. This decentralization aims to accelerate economic growth in each province, fostering healthy economic competition among them.

Additionally, strategic plans are in place to leverage the country's geographical location, including the development of three new ports. The goal is to position the country as a service centre and economic hub in the Indian Ocean.

To catalyse economic growth, the Port City of Colombo has been identified as a special financial zone, facilitating the enactment of necessary laws and ordinances for conducting international financial transactions in the region.

Emphasizing the paramount importance of the country's true resources, its youth, measures are being taken to safeguard this invaluable national resource. Ensuring the safety and well- being of the youth is identified as a crucial priority for the overall protection of the nation.

In recent times, there has been a noticeable emigration of the youth from the country, and this trend persists. It is our collective responsibility to forge a brighter future for our youth, a duty that extends to every individual.

It is crucial to recognize that the resolution to the economic crisis lies not in political but in economic and scientific solutions. Despite this, some political factions continue to advocate out-dated political remedies to gain popularity.

To advance, we must transition to a modern, robust economy. I will present the Economic Transformation Act to Parliament shortly, and relevant institutions have been established.

Progress cannot be achieved solely through political aspirations, un-kept promises, or election-focused slogans. Our commitment is to the on-going nation-building program, ensuring a prosperous future for the youth.

This transformation is a comprehensive and prolonged endeavour, not achievable in a brief period. As I previously mentioned, following this path could lead us to become a developed state by 2048. Quick fixes do not exist for crises, and achieving goals demand persistent effort.

The Bodhisattva’s journey to enlightenment serves as an analogy, emphasizing the dedication required for enduring success, involving millions of years of toil and facing continuous challenges even after attaining enlightenment. Reflecting on this, we need to charter our path in a patient and systematic manner.

In my earlier remarks, I referenced a sermon by the Lord Buddha. Many years after the Lord Buddha’s teachings, Confucius, the philosopher who lived in China around five hundred years before Christ, expressed the following sentiments.

To construct the world, we must first develop the nation. To develop the nation, we must start by building strong families. To establish strong families, we must begin by enhancing our personal lives. And to improve our personal lives, we must first cleanse our hearts.

Therefore, I urge everyone in this assembly to start by cleansing our hearts. To pave the way for future job opportunities and construct a better country for the youth, we must collectively choose the right path. It all begins with mending our hearts.

Our journey can gain momentum only when we unite and confront this challenge collectively. Some individuals, driven by ambitions for titles, prioritize personal gain over the welfare of the country. They manipulate the truth for their own benefit, deceiving both the nation and its people. If we divert from reality and tread the path of illusions, we risk falling into significant peril.

Once again, I urge everyone to unite in the pursuit of our nation building dream. Let us engage in open discussions. If there are alternative methods superior to the ones we are currently employing, please bring them forward. Let us thoroughly examine and discuss them. By coming together and exploring the best systems for our country, we can collectively implement positive change. We are always open to such constructive dialogues.

If you endorse the idea of engaging in these discussions, I am prepared to extend invitations to top officials from international financial institutions, including the International Monetary Fund and the World Bank, to visit Sri Lanka for these deliberations.



Business

Expansion of PayPal services in Sri Lanka officially announced

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Marking a significant milestone in the digital economy, the official announcement on the expansion of PayPal services in Sri Lanka was made on Saturday (16) morning at the Galle Face Hotel under the patronage of Prime Minister Dr Harini Amarasuriya.

The Prime Minister, welcomed the initiative by Sri Lankan banks to collaborate with PayPal. PayPal services will soon be made available in Sri Lanka through initial banking partners Bank of Ceylon, Commercial Bank of Ceylon and Sampath Bank PLC, with additional banks expected to join in the coming months.

The announcement marks a significant step in ongoing efforts to strengthen secure and trusted cross-border payment access for Sri Lankan consumers, freelancers, entrepreneurs, start-ups and businesses.

Sri Lanka’s digital economy agenda is focused on enabling inclusive growth, supporting digital entrepreneurship and strengthening the country’s connectivity with international markets. The expansion of cross-border payment services is expected to play an important role in advancing this vision by enabling Sri Lankan small businesses, start-ups and enterprises to participate more actively in global commerce.

Sri Lanka’s micro, small and medium-sized enterprises are estimated to contribute approximately 52% of the country’s GDP, underscoring the importance of improving global market access for the sector. Freelancers, entrepreneurs, small businesses, start-ups and digital service providers are expected to benefit from improved payment interoperability and more secure and trusted methods of transacting with customers worldwide.

Addressing the event, the Prime Minister said;

“This is indeed a moment of celebration, and I think one that is testament to the fact that Sri Lanka’s role in the digital economy is finally being recognised, and that we are able to position ourselves both regionally and globally. As many of you know, we have ambitious targets for our digital economy, and this is expected to become one of our primary areas of growth and job creation.

We also have many talented freelancers in this sector, and establishing a system of transparent and secure financial services is absolutely important to our growth strategies and to establishing ourselves in this space. The SME sector, online services, e-commerce and the digital economy are all closely linked, and I believe this is a rapidly expanding sector where we can expect some of the most exciting growth opportunities in the months and years ahead.

I think it is extremely important that online services and payments come under a more secure, legitimate and accountable system. We have seen increasing concerns globally about scams, insecure systems and dubious transactions, so establishing a globally accepted and integrated platform that ensures accountability and security is essential as we move forward.

While we are looking to the digital economy, the SME sector and e-commerce as major areas of growth, we cannot forget that our economic growth plan is organised around two fundamental principles: equity, ensuring that no one is left behind, and transparency and accountability.

As we think about expanding the SME sector, supporting freelancers, growing e-commerce and strengthening our digital economy, we must also ensure that the longstanding issues our country has faced, social inequity, economic inequity and widening disparities in growth, are addressed. Our growth must be inclusive, equitable and socially responsible.

I am hopeful that our younger generation, which is enthusiastically participating in this transformation, will take the lead in ensuring that Sri Lanka’s future growth reflects those values.

I hope this collaboration and initiative will bring the benefits we are all hopeful for, and that it will ensure our country remains on the path not only to recovery and resilience, but also to positioning itself regionally and globally as a trustworthy nation, one that is capable of doing much more than merely following others, and one that is positioned as it truly deserves to be.”

Eranga Weeraratne, Deputy Minister of Digital Economy;

“For decades, Sri Lanka failed to introduce a trustworthy, simple and efficient payment solution, despite having talented people, globally competitive products and ambitious plans for the future.

We had entrepreneurs, freelancers and exporters delivering services to the world, but we did not have the proper platforms to support them or to help them receive payments efficiently. With the hard work of the President’s Secretariat, the Ministry of Digital Economy, the Ministry of Finance and all stakeholders, we have now been able to unlock this much-needed digital payment platform for Sri Lankans.

This platform is not only making it easier for Sri Lankans to receive payments from overseas, but also making it easier for clients around the world to do business with Sri Lanka.

For many years, the lack of trusted and efficient payment systems pushed people towards informal and grey-market solutions, meaning a significant amount of money never entered Sri Lanka’s formal financial system. According to current assessments, Sri Lanka’s digital exports amount to around US$1.5 billion, but there is also a large shadow industry because people have struggled to receive payments through formal channels.

This Government is committed to removing those barriers and making it easier to do business in the right way. We are also working on introducing regulatory frameworks for digital currencies and virtual assets as part of our broader digital transformation agenda.

We want to encourage more young entrepreneurs, freelancers and SMEs to participate in exports and the digital economy. Recently, we also introduced digital nomad visas as part of this strategy.

This is how we plan to build a US$15 billion digital economy by 2030 and increase the digital economy’s contribution to 20% of GDP. With the guidance of His Excellency the President, the Ministry of Digital Economy is spearheading this transformation together with all partner ministries and stakeholders.”

Secretary to the President Dr Nandika Sanath Kumanayake stated:

“Expanding the digital economy is a key priority of the new Government, and we believe that the initiative launched today will provide significant support towards achieving that goal.

Discussions on introducing a payment facilitation platform of this nature to Sri Lanka have been taking place over the past 10 to 12 years, during which several obstacles emerged. However, the President’s Office took the lead and held direct discussions with representatives of PayPal in India. As a result of those efforts, we have now been able to introduce this PayPal facility to Sri Lanka.

Special appreciation should also be extended to Dr Muditha Senarath Yapa of our Innovation Commercialization Unit. With the support of the Central Bank and all stakeholders in the financial sector, we were able to successfully bring this initiative to fruition.

This facility will be particularly beneficial to micro, small and medium-scale entrepreneurs, as well as those engaged in the technology sector. PayPal is also a timely requirement for expanding the country’s economy, and it is a matter of satisfaction that this need has now been fulfilled.

I invite young entrepreneurs to make use of this opportunity to further develop and expand their businesses.”

Dr. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka;

“I remember first discussing PayPal with its CEO many years ago at the FinTech Festival in Singapore. At that time, Sri Lanka was not seen as a viable business opportunity, but today I am pleased that PayPal has recognised the country’s potential.

This is an important step in Sri Lanka’s digitalisation journey and a win-win situation for businesses, SMEs and the banking sector. In today’s world, businesses and professionals are no longer limited by geographical boundaries, but one of the biggest challenges faced by freelancers, entrepreneurs and exporters in Sri Lanka has been the difficulty in receiving international payments efficiently.

Enabling inward payments through globally recognised platforms such as PayPal is therefore a timely and significant step for the country. It will provide SMEs, freelancers and online service providers with a faster, safer and more convenient way to receive foreign income directly into their local bank accounts through formal channels.

This initiative will also strengthen Sri Lanka’s participation in global markets, particularly in export-oriented and knowledge-based sectors such as software development, digital marketing, e-commerce and other digital services industries.

Importantly, it will encourage foreign exchange inflows through regulated financial systems, improve transparency and strengthen confidence in the financial sector. This development goes beyond introducing a new payment method — it supports Sri Lanka’s broader vision of strengthening the digital economy, encouraging fintech innovation and enabling Sri Lankan businesses and professionals to participate more actively in the global marketplace.

We hope this initiative will encourage more young entrepreneurs, freelancers and SMEs to expand into exports and digital services, while contributing to Sri Lanka’s long-term economic growth.”

Mr. Nath Parameshwaran, Director, Corporate Affairs, India and South Asia at PayPal;

“It is a privilege to be here today for this important milestone for both Sri Lanka and PayPal. Today’s announcement reflects the strong collaboration between the Government, regulators, financial institutions and industry partners.

We are deeply grateful to the Honourable Prime Minister, the President’s Office, the President’s Secretariat, the Central Bank, the Ministry of Digital Economy and the Ministry of Finance for their leadership, guidance and support in making this initiative possible.

The Digital Economy Vision 2030 is an ambitious and forward-looking agenda that recognises the potential of technology and digital connectivity to drive inclusive economic growth.

What particularly stands out is the focus on ensuring that the benefits of digital transformation reach small businesses, freelancers, professionals and entrepreneurs across the country.

Small businesses and the freelance ecosystem form the backbone of Sri Lanka’s economy, and we are encouraged by the Government’s commitment to creating a more connected and inclusive digital economy.

This has been a genuine partnership among all stakeholders, involving significant commitment over the past several months. From PayPal’s perspective, we look forward to continuing this collaboration and playing a responsible role in Sri Lanka’s growth story.”

Nadia Syed, Senior Vice President, International Cross Border Trade and General Manager, APAC, PayPal;

“It is a privilege to be part of this important initiative, and we are grateful to the Prime Minister for bringing together public and private sector partners around a shared vision for a more connected digital economy in Sri Lanka.

At PayPal, our purpose has always been to empower small businesses, freelancers, entrepreneurs and consumers to gain access to the global economy. With 439 million active accounts across more than 200 markets, we are committed to helping make commerce simpler, more secure and more accessible.

Sri Lanka has a vibrant and outward-looking community of freelancers, entrepreneurs, exporters and startups already serving customers around the world. Their ambition is global, and the opportunities ahead are significant.

For many of them, the ability to receive international payments easily through trusted local banks is an important enabler of growth. It can help freelancers work with clients in new markets and help entrepreneurs turn global demand into sustainable growth for Sri Lankan goods and services.

Together with Bank of Ceylon, Commercial Bank and Sampath Bank, and with the support of the Honourable Prime Minister, we are taking an important step towards creating more accessible cross-border payment experiences for PayPal users and businesses in Sri Lanka.

This is not simply about payments. It is about access, choice and opportunity. It is about supporting Sri Lanka’s freelancers, entrepreneurs and small businesses at a pivotal time as digital commerce and cross-border services become increasingly important drivers of growth.

We look forward to continuing this momentum together with our banking partners to support Sri Lanka’s wider digital economy goals.”

General Manager and Acting Chief Executive Officer of the Bank of Ceylon, Y. A. Jayatilaka;

“We provide digital services to more than 16 million customers across Sri Lanka. In particular, we recently launched a new service called ‘Smart Freelancer’ for the younger generation engaged in providing freelance services to overseas markets through online platforms.

We also introduced a separate loan scheme called ‘E-Creator’ for them at very low interest rates. In addition, we launched the ‘Smart Remit App’ for those sending foreign remittances to Sri Lanka from abroad.

We believe that PayPal will help fill the long-standing gap in having a reliable payment platform alongside these services. Around 150,000 freelance service providers in Sri Lanka are customers of the Bank of Ceylon. There has been a strong need for a platform such as PayPal to enable them to receive salaries and other foreign remittances from overseas more efficiently and securely.

As the Bank of Ceylon, we are grateful for the efforts taken by the Central Bank and the Government of Sri Lanka to make this possible.”

Managing Director and Chief Executive Officer of Commercial Bank of Ceylon, Sanath Manatunge;

“The introduction of the PayPal withdrawal facility marks an important milestone in Sri Lanka’s digitalisation journey. PayPal is not merely a payment platform; it is a significant opportunity for the country’s business community, digital freelancers engaged in international transactions, and the wider digital economy to connect more easily with global markets.

Digital freelancers are already making a highly positive contribution to Sri Lanka’s economy. Across the world, employment opportunities are rapidly expanding in areas such as information technology, remote services, creativity and digital skills.

For a long time, the lack of a formal and convenient mechanism to receive foreign payments was a major obstacle for these professionals. The introduction of PayPal helps address this challenge.

This initiative will strengthen foreign exchange inflows into the country and ensure that the contribution made by Sri Lanka’s freelance professionals to the economy receives the recognition and value it deserves.”

Managing Director of Sampath Bank, Sanjaya Pradeep Gunawardena;

“We see this occasion as the successful outcome of a relationship built through years of effort. The introduction of PayPal is not merely the launch of another payment facility or technological solution, but an important step forward in connecting Sri Lanka more closely with the global digital economy and opening up new opportunities for the country’s people and business community.

Today, the world is changing rapidly. Digital payments, fintech innovation and cross-border financial connectivity have become key drivers of the global economy. They are no longer simply support services, but major factors that determine economic growth, exports, entrepreneurship, employment opportunities and a country’s competitiveness.

We have already seen that Sri Lanka possesses the talent, capability and creativity needed to succeed in the digital economy. Freelancers, technology entrepreneurs, creators and exporters in Sri Lanka are already engaging with global markets. What they require is a financial system that is accessible, reliable and efficient in connecting them with international markets.

When Sampath Bank began this journey with PayPal, our vision was to strengthen Sri Lanka’s connection with the global digital economy. We are extremely pleased to see that journey evolve into an initiative of national importance.”

Minister of Industry and Entrepreneurship Development Sunil Handunnetti, Minister of Labour and Deputy Minister of Finance and Planning Dr Anil Jayantha Fernando, Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe, Senior Presidential Adviser on Science and Technology Prof. Gomika Udugamasooriya, Presidential Adviser on the Digital Economy Dr Hans Wijayasuriya, and Director General of the National Initiative for Research and Development Commercialization (NIRDC), Ministry Secretaries, heads of financial institutions, government officials, industrialists, entrepreneurs and banking sector representatives were also present on the occasion.

[PMD]

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Rupee slide rekindles 2022 crisis fears as inflation risks mount

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ECONOMYNEXT –The recent sharp decline of the Sri Lanka Rupee (LKR) over the past month has reignited anxieties reminiscent of the 2022 financial collapse.

The rupee has fallen more than 5 percent so far this year to a level seen in 2022 after being stable for over three years.

While Central Bank Governor Nandalal Weerasinghe has attributed this volatility to global trends, likely strengthening of the US Dollar and shifting international commodity prices, the domestic implications are profound.

For a nation still in the fragile stages of an IMF-backed recovery, currency depreciation is not merely a technical adjustment; it is a direct threat to the standard of living for every citizen not earning in foreign exchange.

The ripple effects of the depreciation could be detrimental for Sri Lanka’s recovering economy under an IMF deal. Here are a few effects that could adversely impact the island nation:

Sri Lanka remains heavily dependent on imports for essential goods, including fuel, medicine, and food. When the rupee loses value, the cost of bringing these goods into the country rises instantly.

Cost-push inflation is the most direct consequence. As the landing cost of fuel increases, transport and

production costs across all sectors rise, leading to a second wave of price hikes.

In 2022, hyperinflation peaked near 70% following the sudden float of the rupee. While the current depreciation is less drastic, it threatens to reverse the disinflationary trend achieved in early 2025.

Already the inflation has spiked to 5.4 percent in April from 2.2 percent in the previous month, mainly due to sharp fuel price increases and its spillover effects. The recent rupee depreciation has yet to be absorbed into prices.

For the average household, depreciation translates to a hidden tax.

As prices for electricity, gas, and groceries climb, the portion of income available for education, healthcare, and savings shrinks.

The 2022 crisis proved that the middle class is the most vulnerable to sudden depreciation, as their fixed salaries fail to keep pace with the rapidly rising cost of a basic consumption basket.

In 2022, the sudden and uncontrolled floating of the Sri Lanka Rupee acted as a primary catalyst for the nation’s deepest economic collapse, causing the currency to lose over 60% of its value within months.

This sharp depreciation triggered a cost-push inflationary spiral that saw headline inflation peak at an unprecedented 70%, while food inflation soared near 95%.

For the average Sri Lankan, this meant the price of essential imports such as fuel, cooking gas, and medicine, doubled or tripled almost overnight, effectively wiping out the purchasing power of fixed-income earners and pushing millions into food insecurity.

Today, while the current depreciation is more gradual and attributed by the central bank to global trends, rather than domestic depletion, the impact remains a significant threat to household stability.

Unlike the 2022 shock, which was characterized by absolute shortages and queues, this gradual slide serves as a silent tax, steadily eroding the marginal gains made during the recent disinflationary period.

As transport costs and electricity tariffs rise in tandem with the weakening rupee, hardworking families again face the prospect of a nutritional trade-off, where the increasing cost of imported inputs for production and logistics forces a reduction in the quality and quantity of daily consumption.

By Shihar Aneez

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Kapila Chandrasena case: GN phone records under court scrutiny

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Colombo Additional Magistrate Lahiru Silva has directed Keselwatta Police to obtain and examine the telephone data records of a Grama Niladhari who issued certification documents for bail guarantors in a suspected bail-for-money racket linked to proceedings involving former SriLankan Airlines CEO Kapila Chandrasena.

The order was issued after police requested further investigations when four suspects, including Perumal Ganesh, a domestic worker attached to the residence of former cricketer Aravinda de Silva, were produced before court over allegations of presenting fake bail guarantors.

Police told court that investigators have uncovered strong suspicions surrounding the issuance of 17 Grama Niladhari certificates within a five-month period to two individuals—Mohamed Rizwan and Mohamed Ishan—who allegedly acted as guarantors in multiple bail applications. According to police, Rizwan obtained 10 certificates while Ishan obtained seven, all of which were used in court-related proceedings, raising concerns of an organised racket.

The Magistrate ordered that telephone data records of the relevant Grama Niladhari from January to date be analysed as part of the probe.

Police further alleged that Rizwan, Ishan, and Ariya Tissa de Silva, residents of the Sanchi Arachchiwatte area near the Aluthkade Courts complex, provided cash and acted as personal guarantors in the bail application of Chandrasena, who had been remanded in connection with allegations of receiving a USD 2 million bribe in the Airbus deal.

On the 5th, court granted bail to Chandrasena under conditions including two personal sureties of Rs. 10 million each and cash bail of Rs. 500,000. Police allege that the guarantors presented were not known relatives or associates of the accused.

Investigators further informed court that Perumal Ganesh had signed the cash bail guarantee and was identified during an identification parade held on Thursday. The Crime Branch of Keselwatta Police, led by Sub-Inspector K.W.D. Anuruddha, told court that prison officials had identified him.

Police also raised objections to granting bail, noting that investigations into Chandrasena’s death remain ongoing and a final determination has not yet been reached.

However, defence counsel appearing for the suspects rejected the allegations, arguing that their clients were only present to facilitate bail and that no direct charges had been established against them.

After considering submissions, Magistrate Lahiru Silva ordered that the four suspects be further remanded until the 20th and directed police to submit a detailed summary of evidence in the case.

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