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IMF urges Sri Lanka to raise taxes, devalue currency

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People stand in a queue to buy diesel fuel at a petrol station in Sri Lanka, which is currently in the throes of an energy crisis

The International Monetary Fund warned crisis-hit Sri Lanka on Thursday that its foreign debt was “unsustainable”, and called for devaluation and higher taxes to revive the almost bankrupt economy.

The pandemic pushed the South Asian island’s tourism sector — a key foreign-exchange earner — off a cliff, and the government in March 2020 imposed a broad import ban to try to shore up foreign currency.

But more than two years on, Sri Lanka is grappling with food and fuel shortages, which this week saw its public transport crippled as buses ran out of diesel and the state imposed blackouts.

Following its annual review of the cash-strapped country, the IMF said its fast-dwindling foreign reserves were inadequate to service the country’s current foreign debt of $51 billion.

Official data shows Sri Lanka needs nearly $7 billion to service its foreign debt this year, but the country’s external reserves at the end of January were only $2.07 billion — just enough to finance one month’s imports.

The IMF stressed “the urgency of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability”, recommending a return to a “market-determined and flexible exchange rate” — meaning a devaluation of the Sri Lankan rupee.

While the central bank’s set rate is 197 rupees to the dollar, a thriving black market offers 260 rupees for US currency notes.

This disparity has led to a more than 50 percent decline in foreign remittances through official banking channels.

But the IMF noted the country’s economic woes began pre-pandemic.

Soon after taking office in November 2019, President Gotabaya Rajapaksa cut several taxes nearly in half, the IMF said, driving down government revenues and forcing it to borrow more.

Among recommendations to address the crisis was to raise income taxes and VAT, “complemented with revenue administration reform”, the IMF said.

The lack of dollars to import fuel has led to a serious energy crisis.

Besides bringing public transport to a halt on Wednesday, the state’s electricity company also imposed a daily seven-and-a-half-hour electricity blackout — the longest scheduled power rationing in over a quarter of a century.

Without dollars to finance essential imports, rice, milk powder, sugar and wheat flour are in short supply, while local industries are unable to bring in raw materials and machinery.

The shortages pushed inflation to 16.8 percent in January — the fourth consecutive record rise — and the IMF said it expected it to remain in the double digits.

International rating agencies have downgraded Sri Lanka over expectations it may not be able to service its foreign debt, though the government insists it can meet its obligations.



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Rajitha calls for combined lists, denounces those unwilling to join as traitors

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Dr. Senaratne, flanked by Prof. Peiris, M. A. Sumanthiran and Wajira Abeywardena, lashes out at the JVP

Ranil-led group asks govt. to hold PC polls

Former Cabinet Minister Dr. Rajitha Senaratne yesterday (27) claimed that there was no consensus between the JVP and the NPP regarding the long delayed Provincial Council (PC) polls.

Dr. Senaratne said that though JVP General Secretary Tilvin Silva had declared in Jaffna, over the last weekend, that it wouldn’t be possible to conduct PC polls this year, due to financial constraints and legal impediments, the position of NPP General Secretary Dr. Nihal Abeysinghe was different.

Addressing the media at Hotel Nippon, on behalf of the People’s United Opposition grouping, operating out of Ranil Wickremesinghe’s Flower Road Office, Dr. Senaratne, who represents the UNP, claimed that the JVP/NPP was all out to postpone the long delayed PC polls. The New Democratic Front (NDF) parliamentary group, elected to the current Parliament, received the backing of Wickremesinghe.

The ex-Minister explained how the NPP, with a 159-member parliamentary group, could comfortably secure the approval of the Parliament to conduct the PC polls under Proportional Representation system.

Declaring that they would submit combined candidate lists at the PC polls, Dr. Senaratne declared that those who declined to join them would be considered traitors.

Dr. Senaratne emphasised that there was no need for alliances and their objectives could be achieved through fielding combined candidate lists.

The Illankai Thamil Arasu Kadchi (ITAK) was represented by former lawmaker and acting Secretaray General of ITAK but the Sri Lanka Podujana Peramuna (SLPP) and the main Opposition Samagi Jana Balawegaya (SJB) weren’t represented.

Convenor of the People’s United Opposition Prof. G. L Peiris, at the beginning of the briefing, explained how the people were deprived of their democratic rights by the NPP, through the postponement of PC polls.

On Tuesday (26) MPs Shanakiyan Rasamanikkam, Mano Ganesan, and Nizam Kariapper attended a joint Opposition discussion with SJB and others, organised by PAFFREL. MP Rasamanikkam has criticised the delay in holding PC elections.

The Batticaloa District MP highlighted that he had already presented a private member’s bill to facilitate the conduct of elections, under the earlier system.

Rasamanikkam said:”The four Opposition members representing the Parliamentary Select Committee affirmed their stance to hold the Provincial Council elections under the preferential voting system.

“We noted, however, that the establishment of this committee appears to be a measure to further delay the process.

“Concurrently, an Additional Solicitor General of the Attorney General’s Department presented two proposals for conducting the elections.

“One of these recommendations involves introducing minor amendments concerning women and youth representation to the private member’s motion I tabled in Parliament, which seeks to hold the Provincial Council elections under the previous system.”

Meanwhile, PAFFREL said that altogether 42 political parties and civil society organisations were involved in that discussion.

PAFFREL said that of the 42 political parties and monitoring organisations that participated in the discussion, all but one political party consented to endorse the following joint statement. And it was decided to forward the joint statement to the Parliamentary Select Committee and the government.

“We, the secretaries of political parties and representatives of the other organisations, who attended the meeting organised by PAFFREL at the Hector Kobbekaduwa Agricultural Training and Research Institute, on 26 May, 2026, agreed to the proposal adopted to hold the Provincial Council elections as per the electoral system prevailed prior to the enactment of Act No. 17 of 2017, pending the final outcome of the Parliamentary Select Committee. We also agreed to ensure 25% representation of women and youth on a voluntary basis.”

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20 lawmakers, four officials visiting China

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Twenty MPs and four officials are on a visit to China. Dr. Kaushalya Ariyarathna, Deputy Minister, leads the delegation (pic courtesy Parliament)

A Parliamentary delegation, comprising 20 Members of Parliament, and four officials, of the Parliament of Sri Lanka, led by Dr. Kaushalya Ariyarathna, Deputy Minister of Mass Media, is in China to participate in a workshop for Members of Parliament of Sri Lanka being held in Beijing and Guangdong.

The programme has been organised by the International Cooperation Centre of the National Development and Reform Commission (NDRC) of China, from 26th May to 5th June, 2026.

The delegation arrived in Beijing, on 25 May, and commenced official engagements on 26th May, with the Opening Ceremony of the Workshop held at the Fenghui Centre in Beijing, Parliament said.

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More Japanese funds for demining operations in the north

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Ambassador Akio Isomata

Japanese Ambassador in Colombo Akio Isomata yesterday (27) signed a grant contract for a demining project under the scheme of “Grant Assistance for Grassroots Human Security Projects (GGP)”, with Kevin Klerx, Head of Support Services of the Mines Advisory Group(MAG), Ms. Hannah Picton, Programme Manager of the Hazardous Area Life-support Organization(The HALO Trust) and Ananda Chandrasiri, Director/ Programme Manager of the Delvon Assistance for Social Harmony (DASH).

The text of the Japanese embassy press release: “The Government of Japan has provided USD 1,343,202 (approx. Rs. 400million) for these projects, which will be implemented by MAG, The HALO Trust and DASH, to support their humanitarian demining activities in the Northern and Eastern Provinces of Sri Lanka. Under this new project, almost 400,000 m2 of land is expected to be made mine-free, allowing more than 3,100 people to return to their land and approx. 22,000 people in the surrounding areas to expand their economic activities.

Japan has been a major donor to demining activities in Sri Lanka since 2002, and the total assistance amounts to over USD 49 million.”

The statement quoted Isomata as having said that: “Today’s signing of three (3) grant contracts is another testament to Japan’s commitment to continued assistance to the people of Sri Lanka, especially to those in the conflict-affected areas. At the same time, we also have to strengthen assistance to the affected communities for the enhancement of livelihoods and improvement of necessary infrastructure, in order to help the people of the communities to move on to the next stage of socio-economic development in the North and East in a seamless manner. I hope Japan’s continued assistance to the demining efforts of Sri Lanka will further strengthen the strong bond of trust and friendship that exists between Japan and Sri Lanka.”

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