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IMF to begin talks with Lanka

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ECONOMYNEXT – The International Monetary Fund intends to begin discussions with Sri Lanka on a program to support the country, spokesman Gerry Rice said as the island is facing steep currency depreciation and inflation after an unusual bout of money printing to keep interest rates low.

President Gotabaya Rajapaksa said in a national address Wednesday said that he had given the go ahead for an IMF program after meeting senior staff of the lender in Colombo.

“The authorities have also indicated that they are actively considering an IMF-supported program,” IMF spokesman Gerry Rice said.

“We will discuss with the authorities how best we can assist Sri Lanka going forward, including during the Minister of Finance’s visit in Washington in April.”

The IMF has already called for tighter monetary policy to stop liquidity injections which create forex shortages.

The IMF has analyzed Sri Lanka’s economy in a staff report which has been submitted to the board, following annual Article IV consultations. The full report has not been made public, but key conclusions, including that the debt is unsustainable is now known.

The report also warned that the economy could implode unless actions was taken to halt monetary instability, though analysts say the IMF does not make a habit of modelling disaster scenarios.

Rice said the IMF had highlighted “the urgent need of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability, while protecting vulnerable groups through strengthened, well-targeted social safety nets.”

With the debt deemed unsustainable, re-structuring or re-profling will also be required.

Sri Lanka for sometime has not had a working exchange rate regime, with a peg having lost credibility and parallel exchange rates emerging due to money printing.

In a program a float of the currency to end dual anchor conflicts (reserves sales for imports and money printing to maintain the policy rate) is a prior action. Though the exchange rate has been allowed to fall, a clean float has not yet been established.

Analysts have said the central bank should to remove a surrender requirement that effectively imposes a strong side convertibility undertaking in the style of a peg and further weakens the rupee.

Further policy rate hikes are also needed to make the float work.

If a float is not established, economic problems that took place at 200 to the US dollar, will continue to take place at a weaker level. The currency can be appreciated if required after domestic credit slows (consumption and investments slows) and sterilizing inflows.

An IMF program typically involves a tight reserve money program to stop inflation and block the validation of domestic prices as the currency weakens.

Tax hikes and spending cuts will reduce the budget deficit and domestic credit, keeping down the corrective interest rate. Sri Lanka’s private citizens are net savers and are incapable of triggering currency pressure.

A foreign reserve target is also given and reserves for imports are generally discouraged (sometimes a so-called disorderly market conditions intervention is allowed which however can undermine the currency unless they are unsterilized).

Debt re-structuring will also reduce the corrective interest rate and the need to immediately deploy more savings for debt repayment and leave space for reasonable growth path.

India is giving a 500 million US dollar credit and a billion dollar credit for food and medicines which can be used to finance the deficit if they are not used for subsidies.

Medicine credits can be used for the health budget directly or cash collected from private sector importers can be used to finance other expenses such as the salary bill, analysts say.

Unemployed graduates had progressively bloated the public sector and have become a key consumer of the productive efforts of society.

Classical economists and analysts have called for reforms to the central bank to outlaw intermediate monetary regimes (flexible exchange rates/soft-pegs) and go for a single anchor regime made up of a fully reserve-backed hard peg or a clean floating regime with a low inflation-driven monetary base and no foreign reserves.

Such a regime will eliminate the need for IMF programs in the future. A hard peg with a low inflating reserve currency in particular will also serve as a hard budget constraint and help social unrest.



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Elders’ home devastated by fire was a ‘house of horror’: Witnesses

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Death toll rises to 12: Director remanded

Some residents were allegedly chained

Police have come under public pressure to investigate allegations of inhumane treatmenf the residents at an elders’ home in Batagoda, which was also reportedly used as a care centre for persons with special needs, following a devastating fire that has so far claimed 12 lives.

Eyewitnesses who were among the first responders told the media that several residents had been chained inside rooms at the Senehase Kedella Elders’ Home when the fire broke out on Wednesday. They claimed that rescue efforts were hindered as iron chains could not be removed, and that some residents died while being restrained.

Authorities have not yet verified these claims, and Police said investigations are continuing.

Police spokesman ASP F.U. Wootler, contacted for comment, said there were rumours to that effect, but the Police were not in a position to verify the claims until a report from the Government Analyst was received. He said eight survivors with burn injuries were being treated in hospital.

Meanwhile, the Director of the facility had been arrested and was due to be produced before the Horana Magistrate’s Court, Police said adding that he was remanded till June 11.

The death toll from the fire has risen to 12 as of Thursday morning following the recovery of additional charred remains during ongoing forensic examinations at the site. Six others sustained serious injuries and are being treated at the Horana Base Hospital.

Police said 72 residents were inside the facility at the time of the blaze. Of them, 10 died inside the building, seven were injured and hospitalised, while 51 were rescued and relocated.

Survivors were initially housed at Batagoda Junior School before being transferred with Army assistance to another branch of the same care network in Galpatha.

A magisterial inquiry was conducted on Thursday morning. Horana Magistrate Lakmini Vidanagamage visited the scene. The burnt remains were examined and removed under judicial supervision.

Separately, allegations have emerged that residents were required to pay an admission fee of Rs. 75,000, along with a monthly charge of Rs. 35,000 to the centre. Police have not commented on these claims.

The director was taken to the scene as part of ongoing investigations, while forensic experts continue examinations to determine the cause of the fire, which remains undetermined.Anguruwatota Police are conducting investigations.

 By Norman Palihawadane and Nishan S Priyantha

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CERT : AI-generated videos depicting Prez, PM lure public into financial scams

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Sri Lanka CERT has issued a public warning over the circulation of artificial intelligence (AI)-generated videos falsely depicting President Anura Kumara Dissanayake, Prime Minister Harini Amarasuriya and several other prominent personalities to promote fraudulent investment schemes online.

According to complaints received by the national cyber security agency, the videos have been created using deepfake technology and are being used as part of attempts to defraud members of the public through financial scams.

The images of famous sports personalities and other public figures have also been misused in the deceptive content.

The agency has warned that similar AI-generated material has been used to spread false information relating to investment opportunities, employment offers, as well as matters concerning the country’s economy and tax policies.

According to Sri Lanka CERT, the videos are being widely shared across online platforms and frequently contain links urging viewers to make investments in return for purported profits.The agency has cautioned that these links may redirect users to fraudulent websites designed to steal personal information, financial data and money from unsuspecting victims.

Sri Lanka CERT has urged the public to exercise extreme caution when encountering such content online and advised against clicking on suspicious links or sharing personal information through unverified websites.

“The public should remain vigilant and avoid becoming victims of false information and online fraud schemes,” the agency said.

Sri Lanka CERT has also encouraged internet users to verify information through official sources before acting on any investment, employment or financial offers circulated via social media or other online platforms.

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New tax law comes into force

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Speaker Dr Jagath Wickramaratne endorsing the certificate on a Bill (File)

Speaker Dr Jagath Wickramaratne on Wednesday endorsed the certificate on the Inland Revenue (Amendment) Bill, bringing the legislation into force as the Inland Revenue (Amendment) Act, No. 11 of 2026, Parliament sources said.

The Bill, which amends the Inland Revenue Act, No. 24 of 2017, was passed by Parliament on May 19.

The new law introduces a series of reforms aimed at modernising tax administration procedures, improving compliance and enforcement mechanisms, enhancing the accuracy of tax calculations and deductions, and strengthening transparency within the tax system.

The amendments also support broader economic policy objectives and include measures designed to reinforce anti-money laundering safeguards.Among the key provisions of the Act is the mandatory use of Taxpayer Identification Number (TIN) certificates for specified high-value financial transactions.

The legislation also introduces revisions to the calculation of taxable income, clarifies tax exemptions applicable to certain projects and business entities, and expands the scope for information disclosure to relevant authorities.

The amendments are expected to improve the efficiency of tax administration while facilitating greater accountability and regulatory oversight.With the Speaker’s endorsement of the certificate, the Inland Revenue (Amendment) Bill has now become law as the Inland Revenue (Amendment) Act, No. 11 of 2026.

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