News
IMF urges Sri Lanka to raise taxes, devalue currency
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.
The Law Association for Asia and the Pacific (LAWASIA) has backed the campaign by the Bar Association of Sri Lanka against the government’s effort’s to extend the retirement ages of judges of the Superior Courts.
T.L Yap, President of LAWASIA, in a statement dated 26 June, has expressed concern over the NPP government’s move in the wake of President Anura Kumara Dissanayake’s recent statement in Parliament on the delay in making the appointments.
The text of the statement: “LAWASIA shares the concern expressed by the Bar Association of Sri Lanka (BASL) on 25th May 2026 in a letter to His Excellency the President of Sri Lanka regarding the prospect of the Government of Sri Lanka introducing an amendment to the Constitution which would increase the retirement age of the Judges of the Court of Appeal and the Supreme Court.
LAWASIA supports the sentiments expressed by BASL in its letter of 25 May, namely: “Extending the retirement age of the sitting Judges of these Courts at this point of time is likely to be viewed by the public as a blatant attempt to interfere with the judiciary… The independence of the Judiciary and the public confidence reposed in it, are indispensable pillars of the rule of law and the democratic framework of (Sri Lanka).
In that regard it is of paramount importance that the Judiciary must not only remain independent in fact but also must be seen by the public to be wholly independent, impartial, and free from even the slightest perception of influence, favour, accommodation, or impropriety”
The Constitution of Sri Lanka recognizes the independence of the judiciary and its importance in preserving and maintaining the rule of law. The retirement age of senior judges is presently fixed by Article 107(5) of the Constitution. Constitutional amendment in any jurisdiction is a serious matter which must not be undertaken lightly. LAWASIA’s principal concern is that the proposed constitutional amendment has the appearance of an ad hoc initiative without adequate public consultation. This in turn has the potential to undermine public confidence in the judiciary.
An independent, competent and respected judiciary is the cornerstone of any democracy. LAWASIA has long advocated the fundamental importance of this principle.
The essence of LAWASIA’s formal position in relation to the independence of the judiciary lies in the Beijing Statement of Principles on the Independence of the Judiciary in the LAWASIA Region, adopted at the Conference of Chief Justices held in Beijing in 1997 and subsequently signed by 32 Chief Justices from across the Asia-Pacific.
The Beijing Statement in essence emphasizes the fundamental importance of the independence of the judiciary, and comments on a range of related issues including the objectives of the judiciary, the appointment of judges, the tenure of judges, judicial conditions and the relationship between the judiciary and the executive.
Endorsing the concerns raised by another international organization, the Commonwealth Lawyers Association, LAWASIA accordingly calls upon the authorities in Sri Lanka to:
• refrain from proceeding with the proposed constitutional amendments seeking to increase the
retirement age of members of the Judiciary;
• resist piecemeal and ad hoc amendments to the Constitution of Sri Lanka.
• adhere to due process of consultation and stakeholder engagement in constitutional reform;
• desist from taking any steps which would undermine confidence in the Judiciary and
irreparably diminish the independence of the judiciary; and
• ensure adherence to the rule of law and respect for the independence of the judiciary.
A total of 7,300 young people, below the age of 21, had been arrested on suspicion since the launch of the nationwide ‘Ratama Ekata’ anti-drug operation, DIG in charge of the Police Narcotics Bureau, Ashoka Dharmasena, told The Island yesterday.
DIG Dharmasena said the suspects included about 150 females under the age of 21. He added that more than 214,000 suspects had been taken into custody since the commencement of the national anti-narcotics operation.
The operation was launched with the primary objectives of disrupting the supply of narcotics across the country, reducing the demand for illegal drugs and rehabilitating those addicted to narcotic substances, he said.
DIG Dharmasena said law enforcement authorities had so far seized more than 15,000 kilogrammes of narcotics, including cannabis, during the ongoing operation.
He also noted that police had achieved considerable success in intercepting narcotics smuggled into the country by sea, contributing significantly to efforts to curb the illicit drug trade.
The Police Narcotics Bureau said the nationwide operation would continue as part of the government’s broader strategy to dismantle drug trafficking networks and minimise the social impact of narcotics.
by Norman Palihawadane ✍️
Leader of the Abhinava Nivahal Peramuna, Amit Weerasinghe, was yesterday ordered to be remanded until July 3 by Teldeniya Magistrate Kamal Sanjaya Jayatilake over allegations that he defrauded state officials and businessmen of approximately Rs. 120 million by promising to construct cabana holiday resorts in Ella and Digana.
The suspect was produced before court by the Teldeniya Police Headquarters following his re-arrest on fresh complaints. The Magistrate also ordered an investigation into the suspect’s assets and properties, imposed a travel ban, and directed authorities to freeze his bank accounts.
The Teldeniya Police informed the Magistrate that 26 complaints had been received against the suspect so far and that investigations had revealed a large-scale financial fraud.The Magistrate further directed the police to hand over investigations into the alleged fraud to the CID in Colombo by the next court date.
Weerasinghe had previously been granted bail by court but was arrested again following the receipt of additional complaints.
Investigations are being conducted by Teldeniya Police Headquarters OIC CI D. M. Chandrapala and Teldeniya Division SSP Harsha Amarasinghe under the supervision of Central Province Senior DIG Lalith Pathinayake and DIG Sudath Masinghe.
by SK Samaranayake ✍️
Showers will occur at times in the Western, Sabaragamuwa and North-western provinces and in Galle, Matara, Kandy and Nuwara-Eliya districts.
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