President vows to prevent future crises in the country, ensuring a repeat of the 2022-23 crisis never happens again – President tells Parliament

At the recent discussion, we had a chance to outline the roadmap that led us to where we are now and showcase our accomplishments. Let me clear up the misconception spreading about Sri Lanka facing bankruptcy in 2028. I can assure you that under our leadership, we will prevent a repeat of the situation in 2022-23. By 2028, with this government still in power, we aim to achieve stability and resilience.
Our target is to boost Sri Lanka’s foreign exchange reserves to USD 15.1 billion by 2028. This is not just a goal but a commitment we are actively pursuing.

I’ve noticed many individuals offering advice on this issue with detailed information. To date, we have restructured USD 12.55 billion in debt, including USD 1.7 billion in defaulted debt. Of this amount, USD 11.5 billion was borrowed during the 2015–2019 administration.

If the advisory tone heard now was present earlier, perhaps we could have avoided bankruptcy. Timely advice holds more weight than delayed guidance. Hence, the current advice being given lacks validity. The successful conclusion of the second review with the International Monetary Fund (IMF) led to the release of the second tranche of funds. When we took office, the third review had been delayed, and we initiated it only in September. During the election period, the previous administration had not prepared for this review.

After the general election on November 16, we began discussions for the third review with the IMF. Several preconditions and agreements were set during the second review, with one being the implementation of a property tax based on imputed income in 2025. Additionally, a fixed 30% tax on service exports was agreed upon during the second review. The plan is to eliminate the Special Commodity Levy by January and replace it with Value Added Tax (VAT).

The agreement during the second review to abolish the Special Commodity Levy and maintain existing tax-exempt thresholds for personal income stands. An agreement was also made to simplify and eliminate the Surcharge VAT by April 2025. While the Surcharge VAT helps businesses with cash flow, proposals are in place to eliminate it to ease operations.

We’ve taken steps to reduce the burden of the Pay-As-You-Earn (PAYE) tax on professionals. We increased the tax-free threshold and extended the tax bands for Personal Income Tax (PIT). These adjustments provide more relief to lower-income earners while ensuring fair outcomes.

To enhance nutritional standards, we exempted yogurt and dairy products from VAT and reduced the export service tax rate. We also increased the withholding tax and established a system to provide tax relief to retirees relying on fixed deposit income, safeguarding the banking system in the process.

We are progressively reopening the vehicle market in three phases to revitalize the economy. The grace period for the Parate law has been extended to protect small and medium-sized enterprises (SMEs) while ensuring banking system stability.

Additional measures have been introduced, including a monthly allowance for underprivileged students and the continuation of benefits for those in need until further notice. The government aims to offer relief to various sectors and individuals to promote economic recovery and social welfare.

The budget discussions are ongoing, with proposed amendments to the Aswesuma Act awaiting approval. Through these initiatives, we aim to strengthen the economy and support those in need for a more prosperous future.

President’s Media Division (PMD)
18-12-2024