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Prez insists on IMF approved new tax regime, warns of dire consequences unless fully implemented
President Ranil Wickremesinghe, in a televised statement yesterday (18), warned that Sri Lanka wouldn’t be able to obtain assistance of the IMF, or any other lending agencies, or countries, if tough new tax regime was not implemented.
The President said: “If we withdraw from this programme, we will not receive assistance from the IMF. If we don’t get the IMF certification, we will not get the support of those international institutions, such as the World Bank, and Asian Development Bank, and the countries that provide support. If that happens, we will have to go back to the era of queues.
“We may have to face even tougher times ahead. We have to obtain these loans and go for the debt-restructuring programme. We are not doing these wilfully. We have to take certain decisions, even reluctantly.
“However, we will reconsider these decisions periodically.”
The following is the full text of the President’s statement: “An important step in Sri Lanka’s debt restructuring program took place last week. A team under our Minister of State for Finance participated in the annual (October 07) meeting of the International Monetary Fund. Accordingly, a meeting was held under the leadership of the International Monetary Fund, with the countries that had given loans to Sri Lanka and some private institutions that had also given loans.
Over 75 persons participated directly or through zoom technology. The primary purpose of this was to come to a common platform with the 03 main countries that have granted loans to Sri Lanka, namely Japan, China and India, and discuss the next steps to be taken to provide these concessions.
During this meeting, the International Monetary Fund and Sri Lanka pointed out the need for a common platform. India and China have informed us that they will investigate further and provide answers. These two countries have also informed us that bilateral discussions may be required.
Many other countries also participated in this meeting. It is notable that, an Assistant Secretary of the United States Treasury came here. All this was possible because we are implementing the decisions taken in consultation with the International Monetary Fund.
There is one thing about the income of the Government of Sri Lanka. In 2015, when the representatives of the International Monetary Fund came to Sri Lanka, we were told of the need for a surplus in the primary budget. Therefore, we provided that surplus in 2017-2018. But it was reduced as a result of the 2019 Easter Sunday bombings. However, there were no serious issues. They were optimistic that we would be able to increase our revenue, to have a surplus in the primary budget.
At the time, our income was between 14.5% and 15% of the Gross Domestic Product (GDP). However, we agreed that we can gradually increase this to 17%-18%.
However, in November 2019, the country’s taxes were drastically reduced. Then the government revenue decreased to 8.5%. There, the International Monetary Fund declared that it is unable to provide aid because of these agreements.
That year we lost around Rs. 600-700 billion. Simultaneously, we had to face the Covid pandemic. These issues are the main factors that led to the collapse of Sri Lanka’s economy.
The International Monetary Fund notified us that we need to show a surplus in our primary budget. We agreed to it because we needed their support.
The other factor is that it was decided to increase the country’s income from 8.5% to 14.5% of the GDP. It’s impossible to do it all at once. We have planned to increase the country’s income to 14.5% of the GDP by 2026.
Initially, we had to think about how we were going to increase our income. We have printed money because our income decreased. During the past two years, Rs. 2300 billion has been printed. As a result, inflation has risen to 70% – 75%. Food inflation has increased even more.
These need to be controlled, but we also need to secure our income. Therefore, a new tax system was proposed during these discussions. The International Monetary Fund had notified that even the export industries are required to pay taxes.
It was indicated especially in countries with an export economy, taxes are being paid. The IMF also pointed out that our primary export economy was the plantation industry. During British rule, taxes were charged from every plantation sector, including tea, coconut and rubber. Therefore, we decided that if we are to move towards that goal, we will have to pay taxes. The export sector has now questioned this move and if these facts are to be submitted to the International Monetary Fund, we have discussed carrying out an analysis.
The second matter is individual taxes. We have obtained the majority of taxes through indirect taxing. Even the majority of the country’s people below the poverty line had no choice but to pay taxes indirectly. Our direct tax revenue is 20%. 80% which was derived from indirect taxes. The International Monetary Fund had specific questions about it and they were of the view that the amount of tax obtained from direct taxes should exceed 20%. Otherwise, they noted that this would not be successful, as ordinary citizens would be forced to pay taxes.
Therefore, according to this mechanism, and to achieve the goals of 2026, the treasury and the International Monetary Fund discussed the possibility of limiting the taxation from those who have an income of 02 lakhs, but that was not possible. Eventually, income tax was levied on people earning over 100,000. Today, this has become a huge problem in the country.
I would like to point out that based on this backdrop, we may not be able to achieve the desired goals without this tax system. The desired goal is to achieve 14.5% – 15% gross domestic product (GDP) revenue by 2026.
If we withdraw from this program, we will not receive assistance from the IMF. If we don’t get the IMF certification, we will not get the support of those international institutions such as the World Bank, and Asian Development Bank, and the countries that provide support. If that happens, we will have to go back to the era of queues.
We may have to face even tougher times ahead. We have to obtain these loans and go for the debt-restructuring program. We are not doing these wilfully. We have to take certain decisions even reluctantly. However, we will reconsider these decisions periodically.
While successfully conducting our debt restructuring program, we expect to move forward through the economic success achieved through a bountiful Maha season. This will help reduce our economic pressure. We have also discussed measures to increase our foreign reserves. Once we have implemented these measures, we can move forward.
We are in a difficult period. We will have to make tough decisions during these difficult times. I took on this difficult task when no one else was willing to come forward. Hence, I feel I must enlighten everyone regarding this background. The government is ready to discuss this further.
News
Suspended Parliament official to move Court of Appeal, seek international intervention
Chamindra Kularatne, the suspended Deputy Secretary General of Parliament and Chief of Staff, has told the Opposition that he will seek the intervention of the Inter-Parliamentary Union (IPU), Commonwealth Parliamentary Association (CPA), Association of Secretaries General of Parliament (ASGP) and the United Nations Human Rights Council (UNHRC).
Kularatne has also declared his intention to move the Court of Appeal against the suspension that came into effect on 23 January on the basis of an inquiry conducted by retired Additional Secretary S.K. Liyanage.
The inquiry found fault with Kularatne for receiving a pension for a three-year and seven-month period he served as the Secretary to the Chief Government Whip during the previous administration. However, political sources said that though that particular appointment had been on a contract basis, in terms of a gazette issued at that time, it was made pensionable. Therefore, there couldn’t have been any issue with regard to Kularatne receiving a pension as stipulated in the gazette, sources said. The Island learns that Public Administration, Provincial Councils and Local Government Ministry advised that the Cabinet of Ministers be consulted regarding the matter but the Parliament acted even without bothering to seek Kularatne’s explanation.
The Staff Advisory Committee (SAC), chaired by Speaker Dr. Jagath Wickremaratne, has initiated the inquiry, though such an action should have been the prerogative of the Secretary General of Parliament, Kushani Rohanadeera, sources familiar with the developments relating to the unprecedented case, said. The SAC has also disregarded stipulation that in case of an inquiry against the Deputy Secretary General of Parliament, it should have been conducted by an officer senior to him.
The SAC consists of the Speaker, Chief Government Whip Bimal Rathnayake, Deputy Finance Minister Prof. Anil Jayantha (he represents President Anura Kumara Dissanayake who also holds the Finance portfolio) and Opposition Leader Sajith Premadasa/Chief Opposition Whip Gayantha Karunatilleke. Sources said that the SAC had been deeply divided over the decision, with SJB Karunatilleke expressing opposition to the course of action proposed by the Speaker, while Prof. Jayantha didn’t extend his support. Before Kularatne had been informed of the SAC decision on 23 January, he wasn’t given an opportunity to respond to whatever allegations directed at him, sources said.
Kularatne’s complaint to IPU would be the second against Speaker Dr. Wickremaratne since his appointment as the Speaker on 17 December, 2024. The first complaint has been lodged by Jaffna District independent group member Ramanathan Archuna. Parliament accepted the NPP’s proposal to appoint the Polonnaruwa District lawmaker after their first choice Asoka Ranwala resigned after being exposed for false claims of his higher educational qualifications.
Sources said that the ruling party had targeted Kularatne because an influential section, within the government, believed that he had sneaked on the Speaker. Kularatne’s sacking and related accusations and counter accusations dominated social media.
Opposition Leader Sajith Premadasa and ITAK Batticaloa District lawmaker Shanakiyan Rasamanickam threw their weight behind Kularatne with Premadasa questioning the legality of the action taken without seeking an explanation from the official.
Authoritative sources said that in terms of the Parliament (Powers and Privileges) Act, in addition to members of Parliament, officials, too, received protection.
During the United National Front government of Prime Minister Ranil Wickremesinghe, the then Speaker, the late W.J. M. Lokubandara, interdicted Director General (Administration) Lacille de Silva over alleged misconduct though the official claimed he was punished for leaking information. Lacille de Silva successfully moved court against his interdiction and secured his position.
By Shamindra Ferdinando
News
Sri Lanka, UAE review energy cooperation; Trincomalee hub plans discussed
The Ambassador of the United Arab Emirates (UAE) to Sri Lanka, Khaled Nasser Al Ameri, met Minister of Power and Energy Eng. Kumara Jayakody yesterday (26) to review progress on bilateral energy cooperation and explore new avenues for collaboration, with a strong focus on regional energy security and strategic infrastructure development.
The high-level discussion centred on the implementation status of understandings reached in recent years, particularly in the energy sector, and on identifying fresh opportunities to deepen engagement between Sri Lanka and the UAE. Both sides underscored the importance of translating earlier agreements into tangible outcomes amid Sri Lanka’s ongoing energy transition.
A key focus of the talks was the proposed development of the Trincomalee region as a regional energy hub. The meeting reviewed follow-up actions related to the tripartite Memorandum of Understanding signed last year between Sri Lanka, India and the UAE, which envisages collaborative development of energy-related infrastructure and logistics in and around Trincomalee, leveraging its strategic location in the Indian Ocean.
Officials discussed the next steps required to operationalise elements of the agreement, including coordination mechanisms, investment frameworks and timelines, with a view to positioning Trincomalee as a focal point for energy storage, supply and distribution in the region.
The discussions also addressed broader cooperation on regional energy security, with both parties acknowledging the growing importance of resilient, diversified and sustainable energy systems amid global volatility.
The UAE reiterated its willingness to support Sri Lanka’s energy objectives, including through technical expertise, investment and strategic partnerships aligned with the country’s long-term power sector goals.
Minister Jayakody highlighted Sri Lanka’s commitment to strengthening international partnerships to ensure energy security, accelerate infrastructure development and support the shift towards a more reliable and future-ready energy mix.
Ambassador Al Ameri reaffirmed the UAE’s interest in expanding its role as a key partner in Sri Lanka’s energy sector, building on existing goodwill and cooperation.
The meeting reflects Colombo’s broader diplomatic and economic efforts to attract strategic partners to its energy sector, particularly for large-scale projects with regional significance, as Sri Lanka seeks to stabilise supply, enhance security and position itself as an emerging energy and logistics hub in the Indian Ocean, the Ministry said.
By Ifham Nizam
News
Pathfinder Foundation inaugurates a repository for Sri Lanka’s peace initiatives
The Pathfinder Foundation’s Repository for Sri Lanka Peace Initiatives was inaugurated by Erik Solheim—former Norwegian Special Envoy to the Sri Lanka peace process, former Minister of the Environment and International Development of Norway, and former Executive Director of the United Nations Environment Programme (UNEP)—at the invitation of Milinda Moragoda, Founder, and Bernard Goonetilleke, Chairman of the Pathfinder Foundation, both among the principal negotiators of the peace process.
Over several decades, Sri Lanka repeatedly sought to resolve the separatist conflict through negotiations. Despite several initiatives, none succeeded in bringing the conflict to a negotiated conclusion.
Over the years, numerous publications—both local and foreign—have examined Sri Lanka’s conflict. SCOPP maintained a substantial body of documentation on the peace process, from January 2002 to January 2008, and the Norwegian facilitators also hold an extensive collection of records. Nevertheless, a major gap remains: the absence of a consolidated repository that brings together available documentation on the peace process, particularly one that preserves material relating to negotiations that did not reach a conclusive settlement.
Responding to this gap and encouraged by many associated with or studying the process, the Pathfinder Foundation has taken steps to establish a dedicated repository to collect and preserve documentation on Sri Lanka’s peace initiatives. Under this project, the Foundation will gather relevant information on the peace process from local and international sources.
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