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Economic crisis: Treasury Chief frowns on home-grown remedy tried by GR regime
Secretary to the Treasury and Finance Ministry Mahinda Siriwardana has said that even if Sri Lanka achieves the goal of zero corruption, tax revenue will still have to be increased to bridge the budget deficit and lessen the country’s debt burden.
Referring to the Supreme Court ruling pertaining to economic management delivered on Nov 14, 2023, Siriwardena said it was imperative that elected representatives and state officials ensure proper econmic management.
Pointing out that Sri Lanka’s government revenue as a percentage of GDP had been as low as 8.3 percent in 2021, Siriwardana said that the situation was so bad that the government found it difficult to meet day-to-day expenses.
The SC judgment had said the state officials under any circumstances couldn’t absolve themselves of the responsibility for acting in the best interests of the public and were entrusted with significant powers to uphold public trust, requiring them to adhere to the directives of the Constitution, Siriwardana said.
The Treasury Secretary said so delivering the inaugural Prof. K. Dharmasena memorial lecture at the Kelaniya University on Monday (Jan 30) close on the heels of undergraduates storming the main administrative building there to protest against a planned visit by President Ranil Wickremesinghe the following day.
Siriwardana succeeded S.R Attygalle in early April 2022 amidst the worst-ever economic crisis.
The Treasury Secretary explained why President Gotabaya Rajapaksa’s government had failed to secure a Rapid Financing Instrument (RFI) at the early staes of the crisis.
Although President Gotabaya Rajapaksa sought RFI from the International Monetary Fund (IMF) in April 2020, five months after being elected, his administration failed to accept the IMF prescribed immediate debt restructuring. Instead of adopting a strategy of macroeconomic reforms to restore fiscal and external buffers supported by the IMF, the government had opted for what Siriwardana called a home-grown solution.’
Sri Lanka sought RFI in the wake of significant tax reforms with sharp reductions in VAT (Value-Added Tax) and income tax rates and large increases in tax free thresholds. “When taxes were reduced at the end of 2019, nobody questioned how public services would be funded. The result was an unprecedented escalation in debt, leading to this economic crisis.
Siriwardana pointed out that for want of cohesive corrective measures to address the issues at hand, credit ratings continued to deteriorate. By September 2020, Moody’s had downgraded Sri Lanka to Caa1, Fitch downgraded Sri Lanka to CCC by November 2020, and S&P downgraded Sri Lanka to CCC by December 2020, Siriwardana pointed out.
“There have been long-standing structural weaknesses in the Sri Lankan economy which have been neglected for many decades, given the pain associated with remedying these issues. The weaknesses include fiscal sector imbalances, inadequate external policy buffers, financial and monetary sector vulnerabilities, deficiencies in governance, and shortcomings in the legal and institutional framework in the country. The recent external shocks faced by the country, including the Easter Sunday attacks, the COVID-19 pandemic, the Russia-Ukraine conflict, coupled with significant domestic policy errors, exposed these macroeconomic vulnerabilities and triggered the prevailing economic crisis.”
In macroeconomic terms, the crux of the problem has always been the persistent twin deficits – budget deficits in the fiscal account and current account deficits in the balance of payments (BOP) accounts, Siriwardana added.
The Treasury Secretary said that the country should have changed its unsustainable practices, beginning 2006/2007, when the opportunity to access concessional foreign financing diminished in the wake of Sri Lanka’s per capita GDP crossed the middle income threshold. Instead of gradually and significantly reducing its deficits and borrowing requirements, the then government shifted to commercial borrowings, primarily in the form of international sovereign bonds (ISBs). “Most of these bonds have up to a 10-year maturity periods, so, until around 2019, Sri Lanka did not face much difficulty in terms of repayment pressures for external debt.”
Siriwardana also discussed the often raised issue of whether ISBs caused the debt crisis. In fact, the government at the time made a conscious decision to raise additional funds amounting to USD 2.4 billion in long term ISBs to ensure Sri Lanka would have sufficient reserve buffers to get through a period of volatility amidst the election cycles of 2019 and 2020, Siriwwardana said. ” There have been claims that this increase in ISB borrowings was a cause of the debt crisis – however in reality, it was the additional reserve buffers created by those ISBs that enabled the government to avoid a crash in the economy during the worst of the COVID-19 pandemic.
“The government maintained primary surpluses in 2017 and 2018, indicating that the ISB borrowings were not driven by budget deficits, but in order to build up reserves and to improve the quality of reserves by converting maturing short term debt into longer term stable instruments such as ISBs and syndicated loans. The fundamental drivers of the economic crisis were fiscal and debt unsustainability, whereas ISBs were just one of many financing instruments.”
Siriwardana said: “There have been various theories as to what caused the economic crisis, including the COVID-19 pandemic, ISB borrowings, the Debt Standstill policy. However, it is clear that the fundamental cause has been long standing macroeconomic vulnerabilities and domestic policy errors. There have also been various alternative proposals and theories as to how the country can recover without the citizens having to bear a burden. But, we have seen today that measures such as asset recovery, collection of taxes in arrears, elimination of corruption, while all being essential actions, do not serve as an alternative to the macroeconomic reforms being implemented today. Those are reforms that were known to all of us for years if not decades. But, those much needed reforms were delayed mainly due to political reasons. In the past, and up to now, the present generation lived a better life by borrowing thereby sacrificing the lives of the future generations.
“However, it is critical to understand that now we have come to a situation where the present generation should make sacrifices for the betterment of the lives of the future generations.” (SF)
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“Badhu Shakthi 2026” National Tax Week begins
The inaugural ceremony of “Badhu Shakthi 2026” (“බදු ශක්ති 2026”) National Tax Week, organised by the Revenue Administration Reform and Modernisation Unit of the Presidential Secretariat with the objective of strengthening State revenue generation and accelerating the country’s future development process, was held on Monday (06) morning at the Presidential Secretariat under the patronage of Speaker Dr Jagath Wickramaratne.
“Badhu Shakthi 2026” is a year-round national programme aimed at transforming the negative public perception of taxation into a positive one while fostering a culture of voluntary tax compliance. To mark its commencement, a National Tax Week will be observed across the island from 6 to 10 July.
A nationwide media and public awareness campaign will be conducted in parallel, including the distribution of leaflets and a range of promotional activities designed to educate the public directly and encourage greater tax compliance.
Addressing the inaugural event, Speaker Dr Jagath Wickramaratne stated that “Badhu Shakthi 2026” is not simply a tax collection campaign but a national initiative aimed at cultivating responsible citizens who love their country.
Further elaborating, the Speaker said:
“Today marks a significant milestone in our country’s future development and economic stability. The strength and sustainability of any sovereign nation depend on its economic independence. Taxation is one of the key instruments for strengthening State revenue and driving national development.
However, taxation has long been viewed negatively by many people. That perception was largely shaped by those responsible for collecting taxes and by successive administrations. When people develop a sense of national responsibility, their attitudes begin to change. For many years, taxes were regarded as a burden. History has shown us that tax evasion occurred on a significant scale, and it must be acknowledged, however reluctantly, that such practices often enjoyed political patronage.
In the past, the public had little understanding of how their tax contributions were utilised. Taxpayers lacked a clear vision of the benefits derived from the taxes they paid. The present Government has succeeded in changing this situation by fostering a more positive public attitude towards taxation. I wish to pay tribute to all taxpayers who contribute towards the Government’s national development agenda.
Today, people have confidence that the taxes they pay are being put to good use. Expressways, highways and power infrastructure projects are now being implemented using domestic funds. There is a sense of pride among the public that construction of the Kandy Expressway has commenced without obtaining loans from any external source. Cabinet approval has also been granted to commence work on the Kurunegala–Galewela Road.
Today, Sri Lanka has grown stronger as a nation capable of financing development activities through domestic resources rather than relying on foreign borrowing.
In ancient times, the country’s great stupas, reservoirs and irrigation networks were built through the collective contribution of the people. Likewise, Sri Lanka can become a prosperous and developed nation only through collective effort. The taxes collected today are being utilised for the welfare of the people. This was clearly demonstrated when the Government allocated Rs. 500 billion in response to Cyclone Ditwah. In addition, substantial benefits are now being provided to the public through the President’s Fund. Educational assistance is being extended to schoolchildren across every corner of the country. All of these initiatives are being financed through domestic resources.
It is essential that the public are made aware of the real benefits derived from tax revenue and of the development projects being implemented. This will strengthen public confidence in the transparent use of tax revenue. The primary objective of this national programme is to broaden the country’s tax base, improve tax compliance, reduce tax evasion and foster a positive attitude towards taxation. If everyone pays their fair share of taxes, the tax burden borne by others can be reduced.
We do not build a beehive with a single bee. It is created through the collective effort of thousands of bees, making it a remarkable achievement. Likewise, ‘Badhu Shakthi 2026’ is not merely a tax collection campaign. It is a national movement to cultivate responsible citizens who love their country. I extend my sincere appreciation to everyone who has dedicated themselves to making this important initiative a success.”
Labour Minister and Deputy Minister of Finance and Planning Anil Jayantha Fernando:
Labour Minister and Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando said that a proper understanding of taxation among citizens would enable Sri Lanka to make greater progress towards economic and social transformation.
He noted that while individuals naturally pursue their own personal goals and aspirations, many of these objectives cannot be achieved in isolation. The success of any society depends on cooperation and collective effort.
He further stated:
“Today, paying taxes has become a much simpler process. As a result, tax collection is now carried out more efficiently and systematically. At the same time, the Government recognises its responsibility to ensure that tax revenue collected fairly is managed prudently and utilised for the benefit of society. If the Government fails to demonstrate sound financial discipline, people will lose confidence and become reluctant to pay taxes. This was evident in the past.
Accordingly, the Government has introduced a tax administration system founded on strong fiscal discipline. We will not tolerate fraud, corruption or waste. If we are to rebuild this country, every citizen must contribute willingly and with a sense of national responsibility. This should not be driven solely by legal obligation. We are confident that the people of Sri Lanka will fulfil this responsibility.”
Deputy Minister of Economic Development Nishantha Jayaweera, Director General of Customs Wimal Liyanagama, Director General of Excise M.B.N.A. Premaratne, and Commissioner General of Inland Revenue Rukdevi Fernando also addressed the gathering.
Among those present were Director General of Public Relations to the President Dharmasiri Gamage, senior officials of the Presidential Secretariat, the Ministry of Finance, Sri Lanka Customs, the Department of Excise, the Inland Revenue Department, as well as taxpayers and other invited participants.
News
Renovated Narahenpita Railway Station reopens to the public under the ‘Dream Destination’ initiative
The Narahenpita Railway Station, which has been upgraded and refurbished under the ‘Dream Destination’ programme to modernise and improve facilities at 100 railway stations across the island through a public-private partnership, was officially reopened to the public on Monday (06) morning under the patronage of Minister of Transport, Highways and Urban Development Bimal Rathnayake.
The ‘Dream Destination’ programme is being implemented as a sustainable initiative by the Clean Sri Lanka Secretariat, under the guidance of the Ministry of Transport, Highways and Urban Development and the supervision of the Department of Railways.
Located on the Kelani Valley Railway Line between the Cotta Road and Kirulapone suburban railway stations, Narahenpita Railway Station had remained without refurbishment for many years and had deteriorated into an unsafe facility with inadequate passenger amenities. The station serves a large number of commuters travelling to and from the Narahenpita area, where numerous public and private sector institutions are located.
Accordingly, refurbishment work commenced on 27 September 2025, under the leadership of the Clean Sri Lanka Secretariat, with MAGA Engineering (Pvt.) Ltd. providing financial support and undertaking construction work, while NIO Engineering contributed technical expertise and related services.
The refurbishment included the construction of a new pedestrian overhead bridge, installation of a new station roof, extension of the second passenger platform, improvements to the sanitation and sewerage systems, internal and external repainting, installation of new passenger seating, renovation of the railway quarters, upgrading of the lighting system, resurfacing of the station access road with asphalt, and a range of other improvements to the station and its surrounding infrastructure.
MAGA Engineering (Pvt.) Ltd. invested Rs. 40 million in the project.
Addressing the ceremony, Minister Bimal Rathnayake said that the primary objective of the ‘Dream Destination’ initiative is to improve railway services by enhancing passenger facilities, while noting that upgrading the railway service’s human resources and physical infrastructure is a major undertaking.
He emphasised that the Government’s plan is to resolve long-standing issues while systematically improving the entire railway network, adding that several measures have already been introduced to enhance the efficiency of public transport services.
The Minister further announced that the initial steps towards introducing an electric railway service will be taken next year as part of the expansion of the railway network. The first phase will focus on the Colombo–Panadura, Colombo–Makumbura, and Colombo–Ragama corridors.
Minister Rathnayake also stated that, alongside improvements to public transport, the Government has initiated a collaborative public-private development process to upgrade related infrastructure. He described the ‘Dream Destination’ initiative as another commitment aimed at improving people’s daily lives, ensuring their safety and securing their future, while also incorporating public views and aspirations.
Among those present were Member of Parliament Attorney-at-Law Lakmali Hemachandra, Deputy Mayor of the Colombo Municipal Council Hemantha Weerakoon, United National Party Colombo Municipal Councillor Sunanda Liyanapathirana, Additional Secretary of the Clean Sri Lanka Secretariat Eng. S. P. C. Sugeeshwara, Additional Director General Kapila Senarath, Director H. P. S. Shantha, Director (Social Sector) Chinthaka Rajakaruna, Assistant Director Nishantha Alwis, Regional Coordinator Shashi Piyushan, General Manager of Railways Ravindra Pathmapriya, Additional General Manager (Operations) Chandrasena Bandara, Deputy General Manager (Traffic) N. J. Indipolage, Chief Engineer (Industries) Priyantha Deegala, Co-Managing Director of MAGA Engineering (Pvt.) Ltd. Megha Kularatne, Chief Executive Director Piyadasa Madarasinghe, Project Coordinator Sanjeewa Peiris, Maradana Station Master H. P. K. Pushpa Kumara, Narahenpita Station Master R. M. Rohana Upul Kumara, Station Master (Operations) Madhusha Gunawardhana, together with senior officials from the public and private sectors and a large gathering of invitees.
News
Bus Sector Clustering Pilot Program on route numbers 170, 177, and 190
Bus transport is the primary mode of transport that fulfills the daily transport requirements of the country, and this service is provided by the Sri Lanka Transport Board and a large number of independent private bus operators.
Many problems have arisen, such as excessive competitiveness, poor adherence to the prescribed timetable, a large number of operators on the roads, unsafe behavior of bus operators,
inconvenience encountered by the passengers, traffic congestion, service imbalance, and inefficient use of resources due to the long-standing operational system in providing public passenger transport services.
As a successful solution to these problems, many countries in the world have introduced a ‘Bus Sector Clustering Program,’ and the bus service is operated under joint management in the same transport corridor or geographical area.
It has been acknowledged that the introduction of bus sector clustering, a methodology that involves the clustering of unified and coordinated bus services on interconnected routes under a single management, could be used to achieve the provision of an effective passenger transport service and the minimization of most operational and social issues, as opposed to the operation of a single operating unit.
Accordingly, taking into account the matters furnished by the Minister of Transport, Highways, and Urban Development, the Cabinet of Ministers has approved the implementation of the
pilot program relevant to the bus sector clustering program on the bus corridor covering routes 170, 177, and 190 initially, with the participation of related stakeholders, and to expand the project further based on the results of the pilot project.
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