By Sanath Nanayakkare
The prospects for lightening the debt burden of low-income countries such as Sri Lanka will become clearer at the G20 meeting to be held in Bengaluru, President Ranil Wickremesinghe said in Colombo on Tuesday.
He said so referring to the G20 Finance Ministers and Central Bank Governors meeting under the G20 Indian presidency, scheduled during 24th-25th February, 2023.
‘By the end of this week, we will get to hear the outcome of these talks. Then we will know with greater clarity as to how they intend to cooperate on debt relief for Sri Lanka, and how we should go forward,” he said.
The President made these remarks at the Tax Forum organised by Sri Lanka Institute of Marketing (SLIM) at Kingsbury Colombo.
The 1st G20 meeting under the G20 Indian presidency will see the participation of finance ministers and central bank governors of the G20 members, invitee members and heads of international organisations. In total, there will be 72 delegation attending the meeting. According to Indian media, the Indian presidency has designed the meeting agenda in a manner that can foster a meaningful exchange of ideas among ministers and governors on pragmatic and meaningful approaches to address some of the key global economic issues including the debt crisis faced by low-income countries.
Further speaking, President Wickremesinghe recalled that India has already sent a letter ‘acceptable’ to the IMF giving their financial assurances for Sri Lanka, to facilitate a trade-off on Indian debt given to Sri Lanka
“The Paris Club also has formally announced their willingness to do the same. China has also informed us that they would stand with Sri Lanka and support us to resolve our debt crisis. The Chinese approach is different from the approach of the West in this regard. Wordings used by China is different from the wordings used by creditors in the West. And rather than joining a common platform, China has said that they would separately communicate with IMF, India and other creditors to explorer ways to help Sri Lanka lighten its debt burden. We are in discussions with China in this regard and I hope there will be a favourable outcome of these talks soon, ” he said.
“I know that people are experiencing many economic hardships. No politician would like to place economic burdens on the people. But several painful decisions had to be taken to restore significant tax revenue as a ratio to GDP, If those measures had been taken earlier, those could have been taken gradually without causing much pain. Now that the crisis has escalated, resurrection measures have to be taken faster and with greater intensity. I know that I am not popular for doing this. The IMF pointed out that our tax revenue needs to be elevated to 15% plus of the GDP at least as it was in 2019. Currently this stands at 9% plus. They asked us how we expect to get assistance from the tax money of the people of other countries while giving tax relief to our people. IMF also indicated that loss-making state owned enterprises need no longer be a burden on the Treasury.”
“The IMF listed 15 benchmarks for the government to complete by 31 December 2022. We fulfilled 14 of them in a timely manner but the electricity tariff hike dragged on. When it was finally cleared on February 15, we informed the IMF of fulfilling all benchmarks. IMF was amenable to giving us enough time till 2026 to optimize on these benchmarks by and by and improve our exports trade and foreign exchange liquidity to pay our way through the world on our own.””No country will bail us out of this crisis other than than the IMF. When the UNP ran the last election campaign on a platform that favoured an IMF bailout, we were sent home. And now the IMF benchmarks for Sri Lanka to fulfill and qualify for an IMF facility are much higher. We have to meet these benchmarks and as there is no other option. If there are alternative proposals to those of the government, please submit them to the IMF rather than talk to the press. So far only the Ceylon Chamber of Commerce has submitted a plan to the IMF with their proposals for recovery. I will be committed to continuing the government’s programme of rebuilding the country until a better set of proposals is submitted to IMF by a political party or any other organization. I hear that some trade unions are willing to talk to the IMF. I think that will be good if they go ahead and do so. Some political parties have said that if they are elected to office they will increase the tax threshold, but they have not announced how they will fill the resulting revenue deficit. They have also said that they would go the IMF and negotiate. If they do so, that’s good too because it will help accelerate the recovery process,” the President said.
Sri Lanka still ‘under test’ before it can receive crucial second tranche from IMF
by Sanath Nanayakkare
International Monetary Fund (IMF) staff concluding their visit to Sri Lanka yesterday reaffirmed their support to Sri Lanka to move out of the ongoing economic crisis, but did not specify an exact timeline for releasing the second tranche of its Extended Fund Faculty (EFF) arrangement to Sri Lanka.
The IMF mission team led by Peter Breuer and Katsiaryna Svirydzenka that visited Colombo from September 14 to 27, is yet to be convinced that it has received a robust programme from the Sri Lankan authorities where they indicate how they would be addressing the persistent revenue shortfall besides outlining progress in foreign debt restructuring which would give Sri Lanka a breather to balance its financing requirements as it starts to repay its foreign debt.
“We had constructive and productive discussions with the Sri Lankan authorities on economic performance and policies underpinning the first review under the IMF Extended Fund Facility (EFF) arrangement. The people of Sri Lanka have shown remarkable resilience and the authorities have made significant progress on important reforms. The discussions will continue towards reaching a staff-level agreement in the near term that will maintain the reform momentum needed to allow Sri Lanka to emerge from its deep economic crisis, Peter Breuer said.
“The objectives of the IMF-supported program will continue to focus on restoring macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential, he said.
However, the press briefing given by the IMF team yesterday signaled that they needed to see more economic and financial policies to support the approval of the First Review of the program under the EFF arrangement.
“Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP contracting by 3.1 percent in the second quarter on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months, he said.
Speaking further Peter Breuer said: “Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth. The authorities have met the program’s primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability. However, revenue mobilization gains – while improved relative to last year – are expected to fall short of initial projections by nearly 15 percent by year end, in part due to economic factors.
“The onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall. This could weaken the government’s ability to provide essential public services and undermine the path to debt sustainability. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.
“Against continued uncertainty, it also remains important to rebuild external buffers through strong reserves accumulation. Building on the Central Bank of Sri Lanka’s success in controlling inflation, refraining from monetary financing will help keep inflation in check. Other challenges include maintaining cost recovery in electricity pricing.
“The government has made steady progress on structural reforms. Key legislations passed in Parliament, including the new Central Bank Act and the Anti-Corruption Act, could improve governance if implemented effectively. The IMF Governance Diagnostic report would inform future reform measures to strengthen governance when published.
“A new welfare benefit payment scheme was enacted with new eligibility criteria that aims to improve targeting, adequacy, and coverage of social safety nets. To ensure financial stability, steps were taken on conducting bank diagnostics, developing a roadmap for addressing banking system capital and liquidity shortfalls and improving the bank resolution framework.
“The authorities have also made headway on regaining debt sustainability through the execution of the domestic debt restructuring and advancing discussions with external creditors. As Sri Lanka is restructuring its public debt which is in arrears.
“Executive Board approval of the first program review requires the completion of financing assurances reviews. These financing assurances reviews will focus on whether adequate progress has been made with debt restructuring to give confidence that it will be concluded in a timely manner and in line with the program’s debt targets.
“Discussions are on-going, and the authorities are continuing to make progress on their plans for revenue mobilization targets, anti-corruption efforts, and other important structural reforms.”
The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Shehan Semasinghe, Chief of Staff to the President Sagala Ratnayaka, Secretary to the Treasury K M Mahinda Siriwardana, and other senior government and CBSL officials, during the visit. The IMF team also met with parliamentarians, representatives from the private sector, civil society organizations, and development partners.
‘Imposing minimum room rates on five star hotels could ruin tourism sector’
By Hiran H.Senewiratne
The imposing of a minimum room rate on five star hotels on the basis of a recent gazette notification is actually killing the industry. Room rates, accordingly, could henceforth rise to between 80 percent and 100 percent, top travel and tourism industry expert Chandana Amaradasa said.
“The minimum room rate of a five star hotel currently comes to about US $ 65 but with the new gazette notification it would go up to US $ 170 per day. But our competitors, such as, Thailand, Malaysia and Vietnam are maintaining a minimum room rate of US$ 80 to US$ 85, Amaradasa told The Island Financial Review.
Amaradasa said that the tourism industry is just picking- up and ‘this type of move is detrimental to the entire sector because these room rates are normally determined by demand and supply and not by gazette notifications.
Amaradasa added: ‘At present, Colombo five star hotels are mainly patronized by Indian tourists, corporate clients and MICE tourists. This will not only impact hotel revenue but the outside supply chain as well. Nowhere in the world is the tourism industry regulated in this manner and this would enable our competitors, such as, Vietnam and Thailand to attract tourists.
“As a long term consequence, some of the airlines could also pull out of Sri Lanka and hotels will halt recruiting new staff and training them with the limiting of their revenue sources.’
ADL’s journey continues: Unveiling new offices in Indonesia and Malaysia for tech excellence
Axiata Digital Labs (ADL), the renowned technology hub of Axiata Group Berhad, is proud to announce the grand opening of two new offices in Indonesia and Malaysia. These strategic expansions, respectively, mark significant milestones in the company’s journey since it’s inception in 2019. This signifies ADL’s unwavering commitment to revolutionizing the telecommunications industry and propelling the global rate of digital transformation.
The inauguration of these state-of-the-art offices exemplifies the dedication ADL has towards expanding its footprint and harnessing the power of innovation across Southeast Asia. As the first CMMI 2.0 Level 3 IT organization in Sri Lanka and an ISO-certified company, ADL is well-positioned to lead the charge in transforming traditional telcos into techcos through its groundbreaking Axonect Product Suite.
Cheering Indian crowds welcome Pakistan team before ICC Cricket World Cup
Harry Potter actor Sir Michael Gambon dies aged 82
“A comprehensive international dialogue essential to address global challenges in 2024” – President
‘Dates have the highest sugar content to fight Coronavirus’
Sunday Island 27 December – Headlines
#Sundayisland Sunday Island- 31 January- Headlines
News7 days ago
In terms of RTI Act House releases names of MPs who voted for new law
News5 days ago
Business focus shifting in a more favorable direction
Features5 days ago
PAMANKADE -THE TOWN THAT VANISHED !
Business5 days ago
SLT-DIGITAL Services and Surge Global forge strategic partnership to propel growth marketing and develop enterprise software solutions
News5 days ago
No new date yet for AL exam, postponement to have knock on effect
News4 days ago
US delaying visa for Security Oversight Committee head
Business5 days ago
Nirmal Saverimuttu Chief Executive Officer Virgin Voyages
News5 days ago
Expect more Easter Sunday type attacks: minister