SriLankan Airlines, as a prime promoter of destination Sri Lanka, in a bid to support the country’s tourism recovery drive, will be hosting over 150 international travel agents in Colombo for a commercial conference and a travel mart in mid-November this year.

This will be the first time in recent history that such a large representation of the international travel trade industry has arrived in the country for an interactive initiative.

SriLankan Airlines CEO Richard Nuttall said: “Now the country is moving forward, the travel advisories are lifted, fuel is available, and it is time for us to rejuvenate tourism back to experience the wonders of Sri Lanka.

The time has come when as SriLankan Airlines, the national carrier, we would like to demonstrate and show our valued partners across the network, that there was never a better time to visit and to raise awareness across the industry.”

The conference will bring together the travel trade fraternity from across the SriLankan network, focusing on those who significantly offer Sri Lanka in their product portfolio.

The visiting agents will be apprised on Sri Lanka’s tourism aspirations, the airline’s commercial outlook, and will be given a first-hand experience on the country’s ground situation to reassure them of the island’s readiness and stature to host any type of traveler.

The conference will be followed by a travel mart, where Sri Lankan tour operators and destination management companies will be given the chance to interact with the visiting agents to explore business opportunities.

The national carrier currently connects a range of destinations into Sri Lanka which includes leading tourism feeder markets such as the UK, Germany, France, India, and Australia.

The National Carrier has continued to support the country’s recovery efforts in the face of all recent challenges and has effectively and proactively steered many initiatives to retain the faith of travelers on destination Sri Lanka.

Sri Lanka manufacturing sector continued contraction in September whilst the services sector limped to marginal growth as per the Central Bank Purchasing Managers Indices (PMI).

The index compiler, Central Bank, said the manufacturing PMI declined indicating a setback in manufacturing activities on a month-on-month basis.

Services PMI recorded an index value of 51.2 in September 2022 indicating a marginal expansion in the services sector driven by the increases observed in New Businesses, Business Activities and Expectations for Activity.

Nevertheless, many respondents expressed their concerns over the supply side constraints, increase in Value Added Tax (VAT), introduction of Social Security Contribution Levy (SSCL) and increase in direct taxes, which could have negative effects on their business operations.

CB said the Manufacturing PMI recorded an index value of 42.6 in September 2022, with a decline of 7.0 index points from the previous month driven by the decreases in all the sub-indices, except Employment and Suppliers’ Delivery Time.

The decline in New Orders and Production was mainly attributable to the manufacture of food and beverages, and textiles and wearing apparel sectors.

Many respondents representing manufacturing firms primarily catering to the domestic markets, including the manufacture of food and beverages, mentioned that the decline in demand was due to the deteriorating purchasing power of the consumers.

Further, manufacturers in the export-oriented industries mentioned that they experienced a weaker demand mainly due to the fear of recession in the major export destinations.

However, Employment is broadly at the level of the previous month, while an improvement seen in the manufacture of textile and apparel sector.

As the apparel sector frequently suffers from the scarcity of employees, it has tended to recruit despite the gloomy outlook, taking advantage of the healthy influx.

The Stock of Purchases decreased in line with the decline in New Orders and Production while Suppliers’ Delivery Time lengthened slightly in September 2022.

Some respondents mentioned that they continuously experience difficulties in sourcing raw materials due to lower foreign exchange availability, although some recent improvement has been witnessed.

For the next three months, the overall expectations for manufacturing activities will be deteriorated like in September 2022, anticipating demand side impediments to be intensified in the coming months.

The Services PMI, the new businesses expanded in September 2022 compared to August 2022, particularly with the improvements observed in financial services, accommodation, food and beverage and education sub-sectors.

Business Activities in the services sector increased further during September amid the ease of the energy crisis and improvements in economic conditions

Accordingly, business activities related to financial services, other personal activities, education and insurance sub-sectors recorded improvements compared to the previous month.

Nevertheless, business activities of real estate, postal and courier and human health sub-sectors declined during the month.

Employment continued to fall in September due to increasing resignations and retirements besides halt in new recruitments.

Sri Lanka’s premier private sector lobby group, the Ceylon Chamber of Commerce, urged the Government to accelerate reforms and ensure greater accountability of its spending to complement the proposed tax hike.

The Ceylon Chamber’s stand comes hot on the heels of growing opposition to the Government’s move to double corporate income tax to 30 percent amidst other hikes.

In a statement, CCC said it acknowledges the rationale for the recently proposed tax changes but called on the Government to show greater restraint, accountability and transparency on its spending.

“While the tax hike will invariably impact businesses and private sector employees adversely in the current context of high inflation and negative economic growth, it is the widely held perception of the tax revenue not being fully utilized for the benefit of the people, that is likely to drive public opinion on this matter.

“Hence, it is imperative that the Government effectively communicates the actions it is taking to reduce Government expenditure and prioritize spending on areas that are critical to the public,” the Chamber said.

It emphasized that as a part of the fiscal reform agenda, the focus should be in terms of rationalizing and curbing Government expenditure wherever possible.

In 2021, 31 percent of the recurrent expenditure was on public sector salaries of which 30 percent was spent on Provincial Councils while 34 percent was absorbed by defense, policy and public security.

“These must be relooked at in terms of the current priorities of stimulating growth and the need to reallocate expenditure towards spending on more critical areas like public education, health and research and development,” the Chamber said.

In addition, greater accountability, transparency and governance of existing Government expenditure along with visible steps to curb corruption are also essential requirements to motivate tax payers in knowing that their contribution is being well spent.

To drive higher tax collection, the existing tax payer base will need to be widened further so that the burden does not fall on the current base consisting of a small number of corporates and the salaried workforce to a large extent.

This will require significant reform in tax administration and improving the capacity of key revenue collecting agencies to reduce the leakages and ensure greater compliance. Policymakers should make better use of digital solutions to link existing Government agencies and efforts like the introduction of a Digital ID should be prioritized in this regard.

The Ceylon Chamber said the fiscal reform agenda will need to be complemented with genuine efforts to unlock growth and investment opportunities through State-Owned Enterprise (SOE) reform, improvement in the ease of doing business and investment climate and providing a more conducive trade policy environment for exports to flourish.

This will ensure that growth does not stagnate in the next few years and there will be opportunity for the private sector to reinvest and create more economic activity that will stimulate tax collection.

The Outstanding Government debt has surpassed the Rs. 24 trillion mark in May as per provisional data released by the Central Bank last week.As at the end of April, debt stood at Rs. 23.3 trillion and a year ago (May 2021), it amounted to Rs. 17.58 trillion.

The year on year increase is 36.8% or Rs. 6.47 trillion Provisional data for May has been pending for three months after the April figure was first announced in early July.

Of the Rs. 24 trillion debt, total outstanding domestic debt as at May 2022 amounted to Rs. 12.55 trillion while the rupee value of total outstanding foreign debt was Rs. 11.59 trillion.

CBSL said the debt data for May are highly provisional as the outstanding central Government debt excludes several overdue debt service payments after 12 April 2022, the date of which the Interim Policy regarding the servicing of Sri Lanka’s external public debt was announced by the Ministry of Finance, Economic Stabilization and National Policies.

These debt service payments include overdue interest payments of affected debt which are deemed to be capitalized as per the Interim Policy, it added.
In the presentation to creditors in September, central Government debt was stated as $ 70.3 billion or 106.1% of GDP as at end June 2022 and the public debt was $ 80.5 billion or 121.6% of GDP.

Sri Lanka’s debt has been classified as unsustainable by the International Monetary Fund (IMF) which is supporting the Government’s efforts to restructure.

The Government will have to restructure domestic debt as it has increased to Rs 12.5 trillion at the end of May, from Rs 12.4 trillion in April, while the T-bill and T-bonds amounted to Rs 10.8 trillion.

The staff-level agreement with the IMF states that Sri Lanka should achieve a primary surplus of 2.3 percent by 2025 from the primary deficit of 4 percent forecasted for 2022.

Without going for domestic debt restructure , the Government gazetted the amendments to the Inland Revenue Act, where the Advance Personal Income Tax (APIT) threshold was decreased to Rs. 1.2 million from Rs. 3 million per annum, while the rates were increased to a maximum of 36percent , and corporate income tax in the SME, export, and production sectors was adjusted upto a maximum of 30 percent .

However economic analysts said that there should be a balance between indirect and direct taxes, as the Government cannot earn sufficient tax revenue only through indirect taxes.

They noted the current balance between the indirect and direct taxes is appropriate, as decreasing indirect taxes, which are at 17.5percent (with the VAT at 15percent and Social Security Contribution Levy at 2.5percent ), will cause the direct taxes to increase from 36percent to at least 50percent .

“An increase in direct taxes will impact the development of the economy, as the spending power reduces, leading to a decrease in demand, which will reduce production, while no new investments can be made to businesses with tax rates at 40-50 percent they claimed.