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EPF asked to pay 30% tax unless it participates in domestic debt restructuring process

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(L-R) CBSL Governor Dr. Nandalal Weerasinghe, Secretary to the Ministry of Finance Mahinda Siriwardena, Senior Advisor to the President on Economic Affairs Dr. R.H.S. Samaratunga and Deputy Treasury Secretary A.K. Seneviratne addressing the media on domestic debt restructuring in Colombo yesterday.

Banks, which pay taxes over 50%, least affected

By Sanath Nanayakkare

If the Employees’ Provident Fund (EPF) and other pension funds did not wish to participate in the proposed domestic debt restructuring process, there will be an application of higher annual income tax of 30%, Central Bank Governor Dr. Nandalal Weerasinghe said yesterday. The EPF is currently taxed at the rate of 14%.

Dr. Weerasinghe said so, addressing the media in Colombo.Finance Ministry Secretary Dr. R. Samaratunga, Treasury Secretary Mahinda Siriwardena were also present. Dr. Weerasinghe said, “Banking sector has already borne a significant burden of the fiscal adjustment and the economic crisis in several ways. The banking sector has been paying higher tax rates than other corporations.

The total tax burden on the banking sector, which is serving 57 million customer deposits, is more than 50%. Through high tax payment, the banking sector is helping the government’s fiscal consolidation efforts. Further, banks gave moratoriums and faced the brunt of non-performing loans during the Covid-19 pandemic. So, any disturbance to financial system stability could be costly. And disruptions to the banking system will adversely impact the effective transmission of monetary policy. So, the main effort is preserving the 57 million customer deposits in the banks and letting no room for a bank run.

“In contrast, superannuation funds are subject to a tax of 14%. It has been proposed for superannuation bonds to be exchanged for longer term maturity T-Bonds at a coupon rate of 12% until 2025m which will be 9% minimum beyond 2025. So, there is at least 9% return on EPF funds ensured on a long-term basis while there will be no reduction on the current balance of any individual’s EPF. In the event it has to be lowered below 9%, the Treasury has agreed to fill the balance.

“If superannuation funds don’t want to take part in this process, they will be liable to be taxed at 30% instead of the current 14%.”

The minimum participation requirement for EPF is set at 50% for outstanding bonds maturing in 2023 and 100% of bonds maturing between 2024 and 2032, according to CBSL.

 Speaking further the CBSL Governor said:

 “What we expect from this is to bring the government debt stock to a sustainable level within 10 years as per the agreement with the IMF. The number one benchmark in this context is reducing the public debt to GDP to 95 % from 128%. Secondly, the Gross Financing Needs (GFN) of the government needs to be reduced to below 13% of GDP from 34.6 % of GDP between now and 2032. Thirdly, Foreign Debt Servicing needs to be reduced to below 4.5 % of GDP from the current 9.4 % of GDP within the same period. If these targets are achieved, it should help close external financing gaps of USD 16.9 billion. For this, we need to restructure loans obtained from official bilateral creditors such as Japan and China.

Then there is the need for restructuring international sovereign bonds (ISBs) and negotiations are underway for these two elements. Our foreign exchange debt service target is set at 4.5% max. of GDP in 2027-2032. Thirdly, it is important to restructure domestic debt in some form and that is why we are presenting a plan to execute it. One available option in optimizing government debt is to increase taxes and improve the Primary Account Balance. These measures have already been taken. So, the remaining option is restructuring government debt stock through optimization of Treasury Bills and Treasury Bonds. At present Treasury Bill stock is worth LKR 4.1 trillion. 62.4 % of it is owned by the Central Bank of Sri Lanka (CBSL). CBSL has already agreed that its holdings of Treasury Bills would be converted to Treasury Bonds because this will help reduce gross financing needs of the government. And there are

Treasury Bonds worth of Rs. 8.7 trillion of which 20.5% is from superannuation funds including the Employee Provident fund (EPF); 36% from the banks and the balance from insurance funds and other private funds. So, we are looking at the best solution which can protect the banks, depositors and the EPF. That’s why CBSL has agreed to take part in these domestic debt optimization negotiations,” Dr. Weerasinghe said.



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Sri Lanka Navy joins commencement of AMAN-2025

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The multinational naval exercise AMAN-2025, hosted by the Pakistan Navy for the ninth time, commenced at Pakistan Navy Dockyard in Karachi on 07 Feb 25. The event was attended by Commanding Officer and crew of SLNS Vijayabahu, representing the Sri Lanka Navy.

AMAN-2025 will be held from 07 to 11 Feb in Karachi, and the multinational naval exercise will see the attendance of Navy Chiefs, stakeholders and think tank from maritime fraternity, from 60 nations.

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SME representatives accuse presidential aide of instigating protest against Central Bank

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Susantha Liyanaarachchi

A presidential advisor, identified as D. Gamage, had asked a delegation representing the SME sector to “surround the Central Bank” instead of troubling officers at the Presidential Secretariat, Susantha Liyanaarachchi, Chairman of the National Construction Association of Sri Lanka (NCASL) told the media yesterday near the Presidential Secretariat.

Liyanaarachchi said so following a meeting with Gamage, on Friday, during a protest staged by a group of small- and medium-scale entrepreneurs, affiliated with the MSME Joint Alliance, outside the Presidential Secretariat against parate executions.

Five representatives were permitted to enter the Secretariat, where they also submitted a 17-point proposal aimed at reviving the domestic coconut oil industry.

“Gamage said there was no point in coming to the Presidential Secretariat. He asked us to surround the Central Bank. What an awful officer. We came here to settle our issues amicably, and Gamage told us to surround the Central Bank,” Liyanaarachchi said.

Liyanaarachchi also stated that the Central Bank did not adhere to instructions given by President Anura Kumara Dissanayake, exacerbating the concerns voiced by the MSME entrepreneurs.

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Govt. to seek new indictments in Lasantha murder case

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Harini

By Saman Indrajith

The government would try to initiate fresh indictments in the Lasantha Wickrematunga murder case, Prime Minister Harini Amarasuriya said on Friday, pledging that those responsible for the murder of journalist Wickrematunga would be held accountable. She also stated that she intended to respond personally to a letter from Wickrematunga’s daughter, Ahimsa, who has called on Parliament to impeach Attorney General Parinda Ransinghe (Jr.) over the recent release of three suspects.

Ahimsa Wickrematunga’s request for impeachment followed the release of several individuals—among them a police officer—who had been arrested on accusations of destroying evidence, including a notebook belonging to her father and key police records. Speaking in Parliament, Prime Minister Amarasuriya said, “I plan to respond directly to Ms Wickrematunga, as I fully understand her concerns and the distress she must be experiencing. We are doing our utmost to observe due process and uphold the independence of the Attorney General’s office, but justice must prevail.”

She went on to say, “We intend to seek justice for Lasantha Wickrematunga’s murder. President [Dissanayake] has met with those involved to determine the best course of action. We are examining the possibility of refiling or initiating new inquiries if necessary, as there is plenty of evidence.”

Opposition legislator Rauff Hakeem noted that the suspects were released on a technicality related to an identification parade, and expressed concern that the Attorney General was selectively releasing certain suspects, despite there being many dedicated officers within the Department. He added, “Ultimately, the purpose of all our judicial institutions is to deliver justice. If procedures obstruct that aim, we must re-examine them.”

Prime Minister Amarasuriya reiterated that the Government is open to debating the matter in Parliament, saying, “We will look at refiling charges or bringing new indictments where appropriate. We fully appreciate the gravity of this situation and the need for transparency, and we will do everything in our power to ensure justice is served.”

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