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Lanka should aim for revenues of 12-pct of GDP, avoid shortfalls: IMF
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Sri Lanka should aim to get state revenues more than 12 percent of gross domestic product and avoid revenue shortfalls next year, International Monetary Fund Senior Mission Chief Peter Breuer said.
Sri Lanka projected revenues (including non-tax) of 3,408 billion rupee (11.3 -pct of GDP) and the IMF 3,286 billion rupees (about 10.9-pct).Up to July revenues were up 39 percent and tax revenues were up 43 percent, but IMF expects year end revenues to be 15 percent below target.
“Clearly the objective is not to let it happen next year and make up for that shortfall,” Breuer told reporters after Sri Lanka and the IMF reached a staff level agreement incorporating the next set of targets and reforms.
“So, one of the objectives is to get revenue that exceeds 12 percent of GDP and accordingly measures will have to be implemented to achieve that objective.”
Sri Lanka has met all quantitative targets, except for the June indicative revenue target, and most structural benchmarks required up to June have been completed, Breuer said. The new staff level agreement will set the targets and reforms for the next phase of the program.
In 2020 in the worst deployment of macro-economic policy by the country’s official economists and their advisors from the private sector, taxes were also cut on top of rates, eventually driving the country to external default. Revnues collapsed from 11.9 percent in 2019 to about 8.5 percent of GDP by 2021.
As forex shortages build up, Sri Lanka’s economic bureaucrats also ban vehicle and non-essential imports, hitting revenues and further worsening the fiscal picture, in an cascading policy error that repeats often, an economic observer said.
Car imports are still banned
Sri Lanka has now slammed high rates of progressive income tax which are hitting employed workers in the corporate sector, triggering a brain drain, particularly of professionals with young children who cannot make ends meet and keep paying housing loans. There are no exemptions for dependents.
A steep currency collapse has also hit alcohol consumption, with industry officials indicating a 40 percent drop from pre-crisis levels, though some firms are said to be avoiding paying collected taxes amid corrupt practices.
The IMF has recommended a series of reforms in a governance diagnostic report including for revenue authorities. Sri Lanka will have to implement “compensating measures” and improve tax administration to get more revenues, the IMF team said.
In the first stabilization year after rate cuts trigger a currency crisis, revenues are difficult to raise due to the slowdown. This year the economy is contracting and revenues are driven partly by inflation, analysts note.
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Govt. to initiate talks on setting up Truth Commission: FM Herath
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UNHRC Session in Geneva:
The JVP/NPP government has expressed its willingness, at the UNHRC in Geneva to initiate talks on setting up a Truth and Reconciliation Commission to investigate acts of violence caused by racism and religious extremism,
Addressing the High-Level Segment of the 58th Regular Session of the United Nations Human Rights Council (UNHRC) in Geneva, Foreign Minister Vijitha Herath said: “The contours of a truth and reconciliation framework, will be further discussed with the broadest possible cross section of stakeholders, before operationalisation to ensure a process that has the trust of all Sri Lankans. Our aim is to make the domestic mechanisms credible and sound within the constitutional framework. This will include strengthening the work towards a truth and reconciliation commission empowered to investigate acts of violence caused by racism and religious extremism that give rise to tensions within Sri Lankan society.”
“The Government has pledged to take tangible steps in the interest of further advancing national unity and reconciliation. The President has proposed to declare a Sri Lanka Day, in line with our vision for a reconciled Sri Lanka and commitment to bridging gaps between communities. We will ensure that the domestic mechanisms and processes, established to address challenges emanating from the conflict, will continue their work in an independent and credible manner, within the Constitutional framework. Domestic institutions, such as the Office on Missing Persons (OMP), Office for Reparations, and Office for National Unity and Reconciliation (ONUR), will be strengthened,” he said.
Minister Herath reaffirmed Sri Lanka’s commitment to human rights, reconciliation, and sustainable development, highlighting the country’s progress and government’s strategies for continued engagement with the international community.
The government is firmly and sincerely committed to working towards a unified Sri Lanka that respects and celebrates the diversity of its people with no division or discrimination based on race, religion, class and caste. We will not leave room for a resurgence of divisive racism or religious extremism in our country. The fundamental and long standing principles of democracy and freedom enshrined in our Constitution will be fully respected and safeguarded while protecting the human rights of all citizens. Every citizen should feel free to practice their religion, speak their language, and live according to their cultural values without fear or discrimination. No one should feel that their beliefs, culture, or political affiliations will make them targets of undue pressure or prejudice. Administrative, political and electoral processes will be activated towards this end.
A number of confidence building measures have also been taken in the last few months towards reconciliation. In November 2024, a number of roads in the Northern Province, including the Palali-Achchuveli main road, were opened for public use, after several decades. The President, during his visit to the North in January this year, made an open invitation to Tamil-speaking youth to be part of Sri Lanka’s police service. The 2025 Budget includes significant allocations to upgrade the libraries throughout the country, including the historical Jaffna library which is a symbol of education and enlightenment for the Tamil community, he said.
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Indonesia to support Clean Sri Lanka initiative
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Indonesia has pledged support for Clean Sri Lanka programme, the President’s Media Division said.
The assistance in this regard was assured by Indonesian Ambassador Dewi Gustina Tobing when she called on President Anura Kumara Dissanayake at the Presidential Secretariat on Tuesday, the PMD said.
During the discussion, Ambassador Tobing extended Indonesia’s well wishes to the new government and reaffirmed Indonesia’s commitment to strengthening the 70-year-long friendship between the two nations. She said that Indonesia’s current administration would support the Clean Sri Lanka programme, noting that measures have been taken to implement a similar initiative in Indonesia.
The discussions also focused on establishing vibrant trade agreements and free trade arrangements between the two nations. Additionally, both parties explored opportunities to expand markets in a mutually beneficial manner while further strengthening economic, social and cultural ties. Senior Additional Secretary to the President, Roshan Gamage and Indonesian Deputy Ambassador, Fiki Oktanio, were also present at the meeting, the release said.
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First batch of vehicles imported for private use, since 2020, arrives
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The first batch of vehicles imported for private use arrived at the Colombo Port on Tuesday (25) afternoon, following the government’s decision to end a five-year suspension on vehicle imports to conserve meagre foreign reserves.
Speaking to journalists in Colombo on Wednesday morning, Vehicle Importers’ Association of Sri Lanka (VIASL) President Prasad Manage said the first shipment arrived from Thailand, and another shipment from Japan is scheduled to arrive at the Hambantota International Port on Thursday (27).
The Sri Lankan government officially lifted the temporary ban on vehicle imports, which had been in place since early 2020, on January 31, 2025.
One of the primary reasons for lifting the suspension is to boost state revenue and meet the tax target of 15 percent of gross domestic product, a requirement under Sri Lanka’s bailout agreement with the International Monetary Fund (IMF).
During his recent Budget speech in Parliament, Sri Lankan President Anura Kumara Dissanayake said the liberalization of motor vehicle imports is expected to generate a significant portion of the government’s revenue targets.
However, he emphasized that vehicle imports will be closely monitored to prevent any adverse effects on the country’s external sector stability.
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