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Sajith claims VAT hike will shrink economy

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ECONOMYNEXT –Opposition and SJB leader Sajith Premadasa has accused the government of shrinking the economy through its proposal to increase value added tax (VAT) to 18 percent, claiming that it will reduce spending and investments.

Speaking at an event on Friday November 03, Premadasa said Sri Lanka is experiencing a shortage in both dollars and rupees.

“This is a problem. But it can be resolved through economic growth, not through economic shrinkage,” he said.

“This government is shrinking the economy. By increasing VAT, they’re trying to pickpocket the pittance in your hand,” claimed Premadasa.

The increase in VAT, he said, will result in a reduction in spending and investments as people will have less money to spend.

“A country cannot succeed by shrinking the economy. The economy must be grown,” he reiterated, claiming that a future government headed by the main opposition party the Samagi Jana Balawegaya (SJB) will bring about an “era of productivity and exports”.

Earlier in the week, during a discussion with university lecturers on Wednesday November 01, Premadasa claimed that the proposal to increase VAT by 18 percent in 2024 was a distortion of Sri Lanka’s tax formula.

President Ranil Wickremesinghe, meanwhile, defended the proposed VAT hike, amid confusion over how Sri Lanka plans to finance a proposed salary increase for state sector workers in the face of an ambitious 2.3-percent primary surplus target.

Speaking at the National Industry Excellence Awards 2023 on Wednesday, Wickremesinghe acknowledged that the decision to increase VAT was a challenging one, driven by the “need to maintain economic stability”.

The public, particularly the working and underprivileged classes, will have to bear the burden of this “regressive” tax hike, he said.The salary hike for state sector workers is to be proposed in the upcoming budget for 2024, with President Wickremesinghe also promising to request the private sector to increase salaries of employees following an unprecedented rise in commodity prices due to inflation triggered by 2022’s currency crisis.

There is also an ongoing campaign of agitation by state sector unions demanding a 20,000-rupee salary increase. Government spokespersons have not provided specifics on the salary increased that will be proposed in the budget.

Sri Lanka’s deal with the International Monetary Fund (IMF) includes an agreement to achieve a primary surplus of 2.3 percent of the gross domestic product (GDP) by 2025.

It is against this backdrop that President Wickremesinghe’s administration has increased personal income tax and now also plans to hike VAT by a significant margin, despite protests from unions and increased levels of migration.



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USS Canberra makes port call in Colombo

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The United States Navy’s USS Canberra (LCS 30) arrived at the port of Colombo for replenishment purposes on 12 Jun 26.

The visiting ship was welcomed by the Sri Lanka Navy
in compliance of naval traditions.

USS Canberra, a Littoral Combat Ship, is commanded by Commander J McLaughlin.

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Complete the Proposed Education Reform Policy Framework Within One Month – President

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President Anura Kumara Dissanayake has instructed officials to complete work on the proposed Education Reform Policy Framework within one month.

The President issued these instructions during a discussion held on Wednesday (10 June) at the Presidential Secretariat on the education policy concept paper presented by the National Education Commission.

At the meeting, the Chairman of the National Education Commission stated that the current education reforms are being undertaken across several pillars: early childhood education, general education (primary, secondary and tertiary), higher education, vocational education, technological education, digital education and non-formal education.

Attention was also given to Sri Lanka’s education system to date, the various education reforms implemented over the years, and the social changes brought about by those reforms. The President instructed officials to review previous education reforms and to take into account the key lessons emerging from them when formulating the new education policy framework.

Members of the Education Commission noted that, since the establishment of the National Education Commission in 1991, education policies have been formulated from time to time. They pointed out that a significant portion of the 1997 policy had been applied to primary education.

It was further observed that although a policy was formulated in 2016 for general education, it was not implemented accordingly. Likewise, while an education policy was prepared in 2023, it was not adopted as the national education policy. Attention was also drawn to the fact that previous education reform efforts had often been based on programmes developed according to the functions of education-related institutions, rather than on a clearly established policy framework guiding educational change.

Describing the present moment as a significant opportunity, the President emphasised that education reforms should be implemented in a manner that does not disrupt the continuity of the existing education process. Rather than creating a separate policy framework and attempting to operate independently through it, reforms should be integrated carefully into the functioning education system.

The President stated that this represents a considerable challenge for the National Education Commission. He also noted that it would be inaccurate to conclude that either the previous education system or the current one is entirely successful or entirely unsuccessful.

He stressed the importance of carefully identifying both the strengths and weaknesses of the existing system. He further observed that it is not possible to determine in the short term whether an education reform is successful or unsuccessful, as its impact must be assessed over the long term through the changes it brings about in society. For this reason, he emphasised that education reforms require greater caution and consideration than many other types of reforms.

Discussions also focused on the need to conduct an in-depth review of anticipated future social challenges and to incorporate into the new policy framework the elements necessary for developing citizens suited to a changing society.

Special attention was given to the need for a policy framework to regulate all sectors of education that are currently not subject to proper regulation, as well as to the adverse consequences arising from the lack of regulation of private education.

The importance of conducting research into university education reform and the regulation of private universities was also discussed.

Among those present were Prime Minister Dr Harini Amarasuriya,  Deputy Minister of Education and Higher Education Dr Madhura Seneviratne,  Deputy Minister of Vocational Education Nalin Hewage,  Secretary to the President Dr Nandika Sanath Kumanayake,  Senior Additional Secretary to the President Kapila Janaka Bandara,  Secretary to the Ministry of Education, Higher Education and Vocational Education Nalaka Kaluwewa,  Chairman of the National Education Commission Professor A. Sarath Ananda,  and other members of the National Education Commission.

(PMD)

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Committee appointed for restructuring SriLankan Airlines

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The Cabinet of Ministers has approved the appointment of a Committee, chaired by Senior Presidential Advisor on Digital Economy Dr. Hans Wijayasuriya, to conduct a strategic review and restructuring of SriLankan Airlines.

The other members of the committee are as follows:

• Senior Presidential Economic Advisor Duminda Hulangamuwa

• Financial and corporate strategy expert Deshal De Mel

• Transaction and investment banking, mergers and acquisitions expert Dumith Fernando

• The Secretary to the Ministry of Finance or his Representative

• The Secretary to the Ministry of Transport, Highways and Urban Development / a representative of the Civil Aviation Authority

• The Chairman of SriLankan Airlines

• Legal experts with specialised knowledge in corporate, aviation and public law

• Aviation industry experts to be appointed

The Government has recognised the urgent priority of undertaking a comprehensive strategic review of SriLankan Airlines, taking into account the broader macroeconomic context.

The main objective of this exercise is to establish a financially sustainable and commercially efficient national carrier, while reducing the long-term fiscal burden on the Government.

Accordingly, it has been deemed appropriate to establish a dedicated committee to carry out the strategic review and restructuring process in collaboration with the International Finance Corporation (IFC), which is serving as the Transaction Advisor.

The committee will be responsible for:

• Conducting an independent review and assessment of the airline’s strategic direction and future course of action

• Recommending restructuring requirements and possible restructuring models

• Evaluating specific strategic options and identifying the most suitable course of action aligned with the Government’s overall objectives

• Providing oversight, guidance and support for the implementation of the selected strategy and execution framework determined by the Government

The committee will function for the duration of the strategic review and restructuring process, or until it is formally dissolved by the Government of Sri Lanka.

 (PMD)

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