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Foreign debt manageable – CB Governor

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by Sanath Nanayakkare

Doomsayers had predicted that the country’s debt burden would be unmanageable, but that was not the case when one took the alternative economic indicators into account, Central Bank Governor Prof. W.D Lakshman said yesterday at the inauguration session of Sri Lanka Economic Summit 2020, held on a virtual platform.

Prof. Lakshman said that he particularly felt obliged to touch upon the current controversies surrounding Sri Lanka’s fiscal deficits and the current level of its debt.

“There are arguments that Sri Lanka’s fiscal deficits have been excessive and the debt levels are at unmanageable levels, but let me attempt to expand on this aspect in terms of alternative thinking in economic theory,” he said.

“Several countries including Japan, Singapore, and the United States have debt levels far exceeding their GDP. Firstly, this shows that even such high levels of debt could be sustainable when domestic debt is the predominant component in the debt portfolio. It can be shown through alternative indicators that even foreign debt is more manageable than doomsayers indicate.

“The ratio of government’s foreign non-concessional debt to GDP is around 23%, and the remainder is either domestic debt that can be rolled over or dealt with upon long term concessional financing. The annual foreign debt service payments as a percentage of export earnings and remittances stand at around 12% in ‘business as usual’ years such as 2018.

“With the adoption of a fiscal consolidation path from 2021 and the increased emphasis on domestic debt when it comes to financing budget deficits, the aforementioned indicators will improve further. The fears surrounding debt sustainability, therefore, indeed appear unfounded.”

Referring to widespread concerns on import restrictions, foreign trade and foreign economic relations the Governor said: “Import restrictions on non-essential goods working along with low oil prices have provided the country with a saving of US$ 4 billion in import expenditure in 2020. This saving is almost equivalent to the foreign currency debt service payments we settled during the year.

“Import restrictions have also provided an opportunity for our local enterprises to gather steam within the domestic market and to evaluate possibilities of expansion abroad – a mechanism used in all successful growth stories of the world. Those who argue for so-called ‘debt restructuring or debt reprofiling’ must realise that this means reforms of austerity. In my view, Sri Lanka is already undergoing some austerity, but on our terms. This is evident when the ongoing programme of import compression is considered.

“Sri Lanka is introducing ground-breaking reforms to improve its domestic production economy, enhance exports and reduce foreign debt dependence. It is commendable that Sri Lanka is following this approach without being prompted by any foreign agency, while continuing to honour all its financial obligations.”



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UNDP: Rs 600 bn tax cut a huge mistake

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Director of the Sustainable Finance Hub of the UNDP Marcos Neto has called the decision to do away with a range of taxes here a fundamental mistake committed by Sri Lanka.The comment was made at the Parliament complex during an interactive dialogue on ‘Revenue Generation as a Pathway to Sri Lanka’s Economic Recovery’ on Tuesday (09). It was organised on a request by Anura Priyadarshana Yapa, former Chairman of the Committee on Public Finance to the United Nations Development Programme (UNDP).

The Opposition as well as several other parties alleged that the government had lost as much as Rs 600 bn due to the controversial decision to do away with a range of taxes including PAYE, NBT (Nation Building Tax), Withholding tax, Capital Gain tax imposed on the Colombo Stock Exchange, Bank Debit tax and unprecedented reduction of VAT (Value Added Tax). The 15% VAT and the 2% NBT which amounted to 17% imposed on all goods and services were unified and reduced to 8%, effective from the first of December 2019.

The decision was taken at the first Cabinet meeting of the Gotabaya Rajapaksa government on 27 Nov. 2019.Governor of the Central Bank Dr. Nandalal Weerasinghe is on record as having said that the powers that be ignored the IMF warning not to do so and also the immediate need to restructure Sri Lanka’s debt (SF)

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Debate on power tariff hike on 29 Aug.

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Party leaders have decided to debate the electricity tariff hikes in parliament on 29 August.The date was fixed for the debate following a request by the main opposition SJB.The debate will be held from 9.30 am to 4.30 pm on 29 August.

Chief Opposition Whip Kandy District MP Lakshman Kiriella told Parliament on Wednesday (10) that as per the proposed tariff hike the monthly electricity bill of domestic consumers would increase by 75 percent to 125 percent. “This is unbearable. This is like sending the people to an electric chair while they are struggling to make ends meet amidst a massive increase in cost of living.

How does this government expect people would be able to pay such an exorbitant price for electricity? We demand a debate in parliament before this proposed tariff hike is implemented,” Kiriella said.

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British national to be deported

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By Rathindra Kuruwita

The Department of Immigration and Emigration has ordered Kayleigh Fraser, a British national whose passport has been taken into custody after she posted on social media anti-government protests, for violating her visa conditions, to leave the country by 15 August. The Department has already cancelled her visa.

Earlier this month Immigration and Emigration officials visited Fraser at her home and took her passport into custody. The Department said Fraser had been in Sri Lanka for medical reasons since 2019. She had returned home several times, it said.

The Immigration and Emigration officers told her to visit them within the next seven days.Fraser on 02 August said that a group of immigration officers had visited her and asked for her travel document. She said that officials told her that they would return her passport when she visited the Department of Immigration and Emigration.

Fraser added that she had received an anonymous call asking her to leave Sri Lanka as soon as possible before facing ‘big problems.’ Immigration officials visited her house a few days after the call.

Fraser has shared a number of photographs and videos from the ‘Gota Go Gama’ site. Human Rights groups and activists have accused the Sri Lankan government of using Emergency regulations to harass and arbitrarily detain activists seeking political reform and accountability for the country’s economic crisis.

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