News
IMF urges Sri Lanka to raise taxes, devalue currency
The International Monetary Fund warned crisis-hit Sri Lanka on Thursday that its foreign debt was “unsustainable”, and called for devaluation and higher taxes to revive the almost bankrupt economy.
The pandemic pushed the South Asian island’s tourism sector — a key foreign-exchange earner — off a cliff, and the government in March 2020 imposed a broad import ban to try to shore up foreign currency.
But more than two years on, Sri Lanka is grappling with food and fuel shortages, which this week saw its public transport crippled as buses ran out of diesel and the state imposed blackouts.
Following its annual review of the cash-strapped country, the IMF said its fast-dwindling foreign reserves were inadequate to service the country’s current foreign debt of $51 billion.
Official data shows Sri Lanka needs nearly $7 billion to service its foreign debt this year, but the country’s external reserves at the end of January were only $2.07 billion — just enough to finance one month’s imports.
The IMF stressed “the urgency of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability”, recommending a return to a “market-determined and flexible exchange rate” — meaning a devaluation of the Sri Lankan rupee.
While the central bank’s set rate is 197 rupees to the dollar, a thriving black market offers 260 rupees for US currency notes.
This disparity has led to a more than 50 percent decline in foreign remittances through official banking channels.
But the IMF noted the country’s economic woes began pre-pandemic.
Soon after taking office in November 2019, President Gotabaya Rajapaksa cut several taxes nearly in half, the IMF said, driving down government revenues and forcing it to borrow more.
Among recommendations to address the crisis was to raise income taxes and VAT, “complemented with revenue administration reform”, the IMF said.
The lack of dollars to import fuel has led to a serious energy crisis.
Besides bringing public transport to a halt on Wednesday, the state’s electricity company also imposed a daily seven-and-a-half-hour electricity blackout — the longest scheduled power rationing in over a quarter of a century.
Without dollars to finance essential imports, rice, milk powder, sugar and wheat flour are in short supply, while local industries are unable to bring in raw materials and machinery.
The shortages pushed inflation to 16.8 percent in January — the fourth consecutive record rise — and the IMF said it expected it to remain in the double digits.
International rating agencies have downgraded Sri Lanka over expectations it may not be able to service its foreign debt, though the government insists it can meet its obligations.
The Ministry of Defence has announced that the renewal of firearm license of individuals/ institutions for the year 2024 will be carried out from 01 October 2023 to 31 December 2023 and the required details can be downloaded from the Defence Ministry’s website www.defence.lk.
Firearm license renewal for 2024 will not be carried out after 31 December 2023. It is also informed that possession of a firearm without a valid license is a punishable offense under provisions of Section 22 of the Firearms Ordinance.
Registration renewal of Private Security Firms for the year 2024/2025 will be carried out from 01.10.2023 to 31.12.2023. Any renewals made after the deadline will be subjected to a fine or legal action.
President Ranil Wickremesinghe in his Milad-Un-Nabi message urged all Muslim brethren in Sri Lanka, to unite at this juncture in working towards strengthening the path to secure a developed Sri Lanka by 2048.
“Let us together overcome the challenges facing our nation, while adhering to the principles espoused by the Holy Prophet Muhammad, in ensuring a brighter future for all” he said.
The full text of the President’s message :
“My greetings to the Muslim community in Sri Lanka and around the world, observing Milad Un Nabi, being the auspicious occasion commemorating the birth anniversary of the Holy Prophet Muhammad, founder of Islam.
He is celebrated as the final messenger of Allah, known for profound teachings of love and peace that encompass humanity. His journey to spread the message of Islam in the challenging societal context of that time, was marked by significant trials. Even in the face of adversity, the Holy Prophet’s unwavering patience and equanimous strength served as powerful attributes. He was victorious in attaining his aspirations, through boundless sacrifices for faith and humanity.
As we celebrate Prophet Muhammad’s birthday today, it is timely to resolve to uphold the values that were the hallmark of his life, which include mutual understanding, brotherhood, assistance to one another and fairness. Our commitment to fostering social harmony is the most meritorious tribute which could be paid to his legacy.
I urge all Muslim brethren in Sri Lanka, to unite at this juncture in working towards strengthening the path, to secure a developed Sri Lanka by 2048. Let us together overcome the challenges facing our nation, while adhering to the principles espoused by the Holy Prophet Muhammad, in ensuring a brighter future for all.
I wish all those of the Islamic faith, a joyous Eid Milad-Un-Nabi, filled with love, peace and prosperity!”
Ranil Wickremesinghe
President
Democratic Socialist Republic of Sri Lanka
By Shamindra Ferdinando
Chairman of the Parliamentary Oversight Committee on National Security, Rear Admiral (retd.) Sarath Weerasekera has told Speaker Mahinda Yapa Abeywardena that the US should not deny a visa to an MP nominated by the Sri Lankan Parliament to join an official delegation unless he/she posed a threat to US interests.
In a letter dated 25 Sept., 2023, the former Public Security Minister has informed Speaker Abeywardena the issuance of visas was the prerogative of the US mission, but the issue of the US Embassy insisting that he be replaced with a member of a minority community must be taken up.
Of the Chairpersons of 17 Oversight Committees chosen for a 10-day study tour of the US organised by the National Democratic Institute (NDI) and USAID, later next month, only Weerasekera has been denied a visa.
Declaring that he had B1 (business) and B2 US visa (tourism) or combination of the two, Rear Adm. Weerasekera said that he had no special interest or reason to join the delegation but it was wrong for the US Embassy to deny him a visa.
The MP has said that he will seek an explanation from Foreign Secretary Aruni Wijewardena in this regard. “In my capacity as Chairman of the Oversight Committee on National Security, I intend to call a meeting with Secretary Defence and Armed Forces chiefs to discuss this matter,” MP Weerasekera said.
Weerasekera retired in late 2006 after having served the Navy with an unblemished record for well over three decades.
Responding to another query, the former Minister said that the Parliament had been asked by the US Embassy to name another member of his committee, representing a minority community for the programme.
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