Prez announces measures to tackle economic crisis

By Saman Indrajith

President Ranil Wickremesinghe told Parliament yesterday that the government would bring down the primary deficit to 2.3% of GDP by 2025 and increase revenue to 14% of GDP by 2026.

Making a special statement in the House after tabling a copy of the IMF- Extended Fund Facility (EFF) agreement, the President said that the standard corporate income tax rate had been raised to 30%, and sectoral tax holidays had been eliminated. The PAYE tax rate had been raised from 12% to 15%, and the tax exemption limit had been reduced from Rs. 300 million to Rs. 80 million.

The President told Parliament that the government was planning to reduce existing exemptions on VAT by 2024, remove the simplified VAT system, and expedite its reimbursement. Estate Duty would be introduced as a property tax by 2025, with a minimum tax exemption allowance, he said.

President Wickremesinghe said the government was aiming to reduce the inflation rate to 4-6% and bring it to a single digit by mid-2023.

“We are planning to reduce the budget deficit and stop printing money. The forex market thresholds and guidelines will be relaxed while allowing market criteria to determine its activities.

The Central Bank plans to purchase foreign currency to build up foreign reserves,” he said.

The government plans to make public the list of individuals and institutions who enjoy tax concessions and tax holidays, and large-scale government procurement contracts. These measures aim to increase transparency and combat corruption in the country.

The President stated that he had previously requested the support of the opposition to rebuild the economy, but did not receive it. “I made similar requests during the opening of Parliament and Budget debates, but to no avail. Despite my efforts, the opposition refused to extend their support citing various reasons,” he said.

He said that at a time when the country was in chaos in July last year, no one was willing to accept responsibility and he was requested to take over. “I had no power in Parliament, no Members of Parliament from my Party to call my own.” But, He said his strength was his conviction that he was capable of rebuilding the country.

“Some people consider the IMF EFF as just another loan, while others claim that the total debt of the country cannot be paid off with the amount received.”

President Wickremesinghe noted that these statements show either ignorance or a willingness to betray the country for political gain.

The President said that the IMF facility is not a loan given at burning interest but a credit facility given to rebuild a fallen country.

He said that the IMF EFF will restore Sri Lanka’s international recognition, ensure the country is not bankrupt and help banks regain international recognition.

“This will create opportunities for low-interest credit, restore foreign investors’ confidence and lay the foundation for a strong new economy,” he said.

“We are now starting a new journey. We have to introduce many economic reforms throughout the process. The foundation for our success will be through this path,” the President said, adding that some of these reforms have already been proposed and implemented through the interim budget of 2022 and the budget for 2023.