September 14, Colombo (LNW): In an effort to support economic recovery and ease the burden on middle-income earners, the government has announced proposed adjustments to the Personal Income Tax (PIT) structure. These changes aim to maintain fiscal responsibility while offering relief to those most impacted by recent tax reforms.
Following discussions with the International Monetary Fund (IMF), the proposed amendments to the PIT structure were outlined in a Cabinet Memorandum. The original tax reforms, introduced in mid-2022 as part of a broader strategy to boost government revenue during the economic crisis, included a tax-free threshold of Rs. 1.2 million per annum, tax bands of Rs. 500,000 each, and a marginal tax rate up to 36%. These reforms were part of Sri Lanka’s commitment under the Extended Fund Facility (EFF) programme with the IMF, which targets a primary budget surplus of 2.3% of GDP by 2025, alongside a goal of raising tax revenue to 14% of GDP by 2025.
Responding to public demand for relief, particularly from middle-income earners, the government re-entered negotiations with the IMF in mid-2024. The proposed changes include increasing tax bands from Rs. 500,000 to Rs. 720,000 while maintaining the tax-free threshold at Rs. 1.2 million and preserving the marginal tax rates, including the top rate of 36%.
The adjustment, set to take effect in April 2025 following amendments to the Inland Revenue Act, No. 24 of 2017, is aimed at alleviating the burden on middle-income earners. A person earning Rs. 150,000 per month will see a 14% reduction in their tax burden, while higher-income earners will experience limited relief. The overall impact on government revenue is expected to be 0.07% of GDP, which has been accounted for through compensatory measures such as revenue from vehicle import liberalization in 2025.
President Ranil Wickremesinghe, also serving as Finance Minister, emphasized that the proposed amendments strike a balance between fiscal discipline and providing relief to mid-level earners. The Cabinet is expected to approve the drafting of these amendments, with implementation scheduled for April 2025.
September 14, Colombo (LNW): Sri Lanka’s Finance Ministry has recently clarified misconceptions regarding the country’s debt management and economic stabilization efforts. Contrary to some views, the
Ministry asserts that the current economic stability is not solely due to the suspension of foreign debt payments but is significantly driven by ongoing macroeconomic reforms.
The Ministry explained that not all foreign debt is suspended. The moratorium announced in April 2022 only affected external commercial and bilateral debts, while multilateral debt payments continued as per standard practices.
In 2022 and 2023, Sri Lanka paid USD 2,483 million and USD 2,589 million in debt service, respectively, approximately half of the typical annual payments before the moratorium.
The Debt Standstill was implemented due to a severe decline in foreign reserves, which had fallen to USD 24 million by April 2022. This temporary measure aimed to provide room for negotiating sustainable debt restructuring while managing future payments effectively.
Economic stability is attributed to comprehensive reforms rather than just debt suspension.
These reforms address fundamental solvency issues rather than merely liquidity problems. The IMF-supported reform program, initiated in September 2022, has restored confidence in Sri Lanka’s economic direction, enabling local banks to participate in international trade despite a default status.
Debt restructuring is designed to create sustainable solutions by extending repayment periods and reducing cash outflows, thereby allowing time for economic growth and fiscal stabilization. The goal is to alleviate the debt burden while rebuilding fiscal and external buffers.
Recent reports show a slight increase in Sri Lanka’s total debt. By the end of June 2024, the government’s total debt rose to Rs 100.65 billion, up from Rs 100.39 billion in March 2024.
Domestic debt increased to USD 57.29 billion, and external debt rose to USD 37.54 billion. Commercial debt represents the largest portion of external debt, with 85% attributed to International Bond Issuances (ISBs).
The Ministry attributed the slight increase in total debt during restructuring to several factors:
Restructuring Terms: Adjustments such as extending maturities and reducing interest rates can increase the nominal value of debt over time.
New Borrowing: Additional funds needed for ongoing expenses or economic stabilization can lead to a rise in total debt.
Currency Depreciation: Depreciation of the local currency against foreign currencies can increase the local currency value of foreign debt.
Economic Challenges: Slow growth, reduced government revenues, and increased social spending can strain finances and lead to additional borrowing.
September 14, Colombo (LNW):Sri Lanka’s government is preparing to significantly boost the competitiveness of over 21,000 small and medium-sized enterprises (SMEs) nationwide. Minister of Industries and Health, Ramesh Pathirana, stressed the need for aligning with Indian industrial advancements and partnering with global entities to achieve these goals.
This effort is part of Sri Lanka’s broader strategy to shift towards an export-focused economy, with a key emphasis on the manufacturing sector.
Pathirana highlighted the necessity for the manufacturing sector to evolve into a competitive and digital-driven industry. This transition is in line with the country’s aim to achieve zero carbon emissions and develop a green economy.
To support this shift, the government plans to provide essential resources and infrastructure to ensure local industries can compete globally.
A major component of this initiative is the creation of a new development bank, which will offer low-interest loans to industrialists, facilitating business investment and increased competitiveness. An Economic Commission will also be established to oversee these efforts.
According to a recent Department of Census and Statistics survey, Sri Lanka has 21,260 industrial establishments, with the majority being small and medium enterprises. The sector employs about 1.48 million people, underscoring its vital role in the economy.
Brahman Balaratnarajah, the newly re-elected chairman of the Industrial Association of Sri Lanka (IASL) and Deputy Managing Director of Haycarb PLC, praised the resilience of Sri Lanka’s industrial sector amid economic difficulties.
Speaking at the IASL’s AGM, Balaratnarajah reaffirmed the association’s commitment to the government’s strategic objectives, particularly in innovation and sustainability. He encouraged the industry to adapt to global trends, focusing on technological advancements and the development of a skilled workforce, particularly targeting Generation Z.
Sri Lanka’s manufacturing sector has shown positive trends, with the Purchasing Managers’ Index (PMI) for manufacturing reaching 59.5 in July. The Central Bank noted that this growth was driven by robust performance in the textiles and apparel sectors.
Both food and beverage production, and textiles and apparel, saw substantial improvements.
In the first quarter of 2024, Sri Lanka’s apparel industry achieved a milestone, with revenue exceeding US$1 billion. Export growth was notable, with a 7.7 percent increase in March, particularly strong in European and UK markets.
September 14, Colombo (LNW): The procurement process for Sri Lanka’s Multi Lane Free Flow Electronic Toll Collection (MLFFETC) system has been marred by corruption allegations.
The Road Development Authority (RDA), under the Ministry of Transport and Highways, called for bids on April 10 for the installation of an electronic toll system on a Build, Own, and Operate (BOO) basis.
The selected bidder was expected to first deploy the system on the Port Access Elevated Highway and later extend it to other expressways. The bid documents provided conceptual designs and specifications.
The electronic toll collection (ETC) system is designed to enhance toll payment efficiency by allowing vehicles to pass through without stopping, thus minimizing delays.
It functions by electronically debiting users’ accounts and automatically opening gates as vehicles approach. The initiative was fast-tracked by the Ministry of Highways after reports that up to 20% of toll revenues were being misappropriated by cashiers on expressways, according to a senior RDA official.
The tender process included a public notice in local newspapers and a pre-bid meeting attended by over 15 companies. However, the Request for Proposals (RFP) drew criticism for insufficient information, leading to numerous questions.
The RFP also mandated the installation of CCTV cameras—three per pole at one-kilometer intervals—with a storage capacity of 24 hours of footage for 45-50 days. Experts observed that the emphasis on CCTV requirements seemed disproportionate to the primary focus of the tolling system.
Many bidders were dissatisfied with the RFP specifications, citing hidden or inadequately detailed requirements. Consequently, several interested foreign and local firms chose not to submit proposals for the eight-year project intended to replace manual toll collection with a Multi-Lane Free Flow Toll Collection System.
The RFP specified the use of Radio Frequency Identification (RFID) technology, which includes tags and readers. These RFID tags, introduced to the public since 2019 for vehicle registration, have experienced connectivity issues with readers.
Some bidders alleged that the RFP’s technical details appeared to favor the current supplier of number plates to the Department of Motor Vehicles (RMV).
Ultimately, only three companies submitted bids—two with foreign partnerships and one with a locally developed solution.
Two of these bids were rejected, leaving just one bid under consideration. This remaining bid is from a well-known company with a vested interest in the contract, raising further concerns about the tender process’s fairness.
September 14, Colombo (LNW): The renovation of the Anuradhapura–Mahawa railway line, undertaken at a cost of US$ 92 million to enhance the efficiency and regularity of Sri Lanka’s transport services, has been completed and officially handed over to the Sri Lanka Railway Department.
Project Director Chinthaka Jayasekara stated that the renovation, financed under a loan scheme from the Government of India, was carried out in three stages: Anuradhapura–Omanthai, Anuradhapura–Mihintale, and Anuradhapura–Mahawa. The work on the Anuradhapura–Mahawa section began in January this year under the patronage of Indian High Commissioner to Sri Lanka, Santosh Jha.
The Railway Department is optimistic that train services between Mahawa and Anuradhapura will resume tomorrow (14).
September 14, Colombo (LNW): Sri Lanka’s private creditors and the country’s government officials are holding a third round of talks this week to agree on the restructuring of $12.6 billion in defaulted bonds, according to people familiar with the matter, Blomberg news agency reported. .
This new round of negotiations — the first since creditors and the government reached a preliminary agreement on a debt rework in early-July — also marks the third time bondholders have gone “restricted,” or prevented from trading the securities while talks are ongoing, the people said, asking not to be named because talks are private.
Representatives for the bondholders and the government didn’t reply to a request for comment. The creditor group holds about 50% of the outstanding overseas bonds and includes Amundi SA, BlackRock Inc. and T Rowe Price.
The committee is represented by its legal adviser White & Case LLP and its financial adviser Rothschild & Co.
The government is seeking to reach a final agreement on the debt before the country’s presidential election set for Sept. 21, one of the people said, adding that a statement with details on the ongoing negotiations may be released next week.
The July deal with private bondholders envisaged a 28% nominal reduction in the bonds’ principal, and the issuance of so-called macro-linked bonds, whose payouts are linked to economic growth. The agreement needs the backing of the International Monetary Fund and the country’s bilateral creditors, such as China and France.
Sri Lanka bonds due in 2030 traded at around 51 cents on the dollar on Friday at 10:19 a.m. London time, according to indicative pricing compiled by Bloomberg.
The talks are “likely to address the information vacuum market participants have faced since the last notification regarding bond restructuring in late-July,” said Avanti Save, head of Asia credit research and strategy at Barclays Bank Plc. “If an agreement is reached then it also reduces the risk of a long-drawn out renegotiation process post elections.”
The election will be the first for the country since an economic crisis in 2022 caused living standards to plunge and the government to default on its debt for the first time ever. It is shaping up to be a close race between three candidates, including the incumbent who negotiated the IMF bailout and opposition leader Sajith Premadasa, who plans to reopen negotiations with the multilateral lender, if elected.
Sri Lanka’s main opposition leader said he’ll reopen negotiations with the International Monetary Fund on its $3 billion loan if he wins next week’s presidential election to ease the financial burden on working class people.
Sajith Premadasa, 57, wants rich individuals to bear more of the cost of the economic adjustment that came with the bailout program. The austerity measures that were imposed, such as tax and electricity-price hikes, and the debt restructuring, have made the incumbent leader Ranil Wickremesinghe deeply unpopular, creating a tight race for the Sept. 21 vote.
“We will make sure there is justice and fairness,” Premadasa said in an interview in his Colombo office. “The burden should be shared by the super rich, not the working class poor.”
The election will be the first for the country since an economic crisis in 2022 caused living standards to plunge and the government to default on its debt for the first time ever. Widespread unrest that followed forced the populist Gotabaya Rajapaksa to flee the country and resign. His successor Wickremesinghe went on to negotiate the IMF bailout the following year.
Premadasa, who runs a breakaway group that splintered from Wickremesinghe’s party in 2020, has emerged as one of the three leading candidates contesting an election that analysts say is too close to call. He’ll face Wickremesinghe and Anura Kumara Dissanayake, a candidate with roots in Marxist socialist policy.
Both Premadasa and Dissanayake have said they’ll reopen negotiations with the IMF, adding to policy uncertainty. The IMF needs to conduct a third review of the loan program before it disburses the next tranche of funding, estimated at about $350 million.
Sri Lanka’s government still hasn’t finalized debt restructuring deals with some of its creditors two years after defaulting. Investors have in recent weeks started to cut their exposure to the nation’s dollar bonds amid concerns over further delays in the debt overhaul.
The nation’s private creditors and government officials are holding a third round of talks this week to agree on the restructuring of $12.6 billion in defaulted bonds, Bloomberg News reported earlier, citing people familiar with the matter. The government is seeking to reach a final agreement on the debt before the election, one of the people said, adding that a statement with details on the ongoing negotiations may be released next week.
Premadasa declined to give details of what he’ll seek to change in the IMF loan conditions, although he was critical of a domestic debt restructuring agreed to by the current administration, which he called “dastardly” unfair in its treatment of local pension funds.
In an Aug. 2 statement, the IMF said that the timing of the program’s third review will be discussed with the government after the polls. Julie Kozack, the IMF’s chief spokesperson, reiterated that view on Thursday in Washington, saying “we will move forward with program discussions after the presidential elections take place.”
Dhananath Fernando, chief executive officer of Advocata Institute, a Colombo-based think tank, said rising costs, including food price hikes, can’t be fully attributed to the IMF program, and energy prices were raised to partly make up for the currency’s depreciation.
He noted that most food prices and energy costs have eased in the past two years, although lower-income consumers are still “worse off compared to before the crisis.”
Boosting Exports
Premadasa leads the Samagi Jana Sandhanaya and has previously held ministerial portfolios in government, including housing and health. His manifesto, titled ‘Towards an Advanced Social Market Economy,’ champions boosting exports, reducing taxes, setting up an independent public prosecutor to tackle corruption and strengthening the rule of law.
“Export-driven economic development is one of our main mantras,” Premadasa said in the interview on Wednesday. “We would also have a purposeful effort to promote manufacturing industry, as it is of great importance to ensure that we have quality economic growth.”
Premadasa said he champions good governance and will strive to improve Sri Lanka’s business environment to help lure foreign direct investment. In a reference to popular leftist candidate Dissanayake, Premadasa said “Marxist ideologies, and extreme hardline leftist tendencies will certainly not be the kind of situation which would attract FDI.”
Dissanayake is gaining momentum in the race on a campaign platform of eliminating corruption. His coalition of leftist parties and groups, backed by protesters who ousted the Rajapaksa government in 2022, opposes the debt restructuring framework agreed with the multilateral lender.
Premadasa said the IMF program needs to be reworked to ensure a better outcome for citizens.
“We need to be very professional in our negotiations with the IMF and we will have a good deal, a strong deal,” he said. “Nothing will be derailed but everything would be humanized.”
President Ranil Wickremesinghe emphasized that no vacuum should be allowed to occur in state power, as such a situation could lead to a serious disaster. He further stated that state power must always be smoothly transferred from one party to another. Referring to Bangladesh’s current situation, the President pointed out that the inability to fill a power vacuum has led to a national crisis. He recalled that in 2022, Sri Lanka too faced a similar threat, but he intervened to prevent it.
Sri Lanka’s main opposition leader said he’ll reopen negotiations with the International Monetary Fund on its $3 billion loan if he wins next week’s presidential election to ease the financial burden on working class people.
National People’s power presidential candidate Anura Kumara Dissanayake issued a strong challenge to independent presidential candidate Ranil Wickremesinghe during a business meeting held in Matara. Dissanayake dismissed Wickremesinghe’s political tactics as mere drama, emphasizing the need for responsible leadership to address the country’s crises.
President’s Counsel Kaushalya Nawaratne has resigned from his position as the President of the Bar Association of Sri Lanka (BASL) with immediate effect. The Bar Council of the Bar Association of Sri Lanka (BASL) on August 31 had unanimously decided to call for the resignation of BASL President Kaushalya Nawaratne.
The Cabinet of Ministers approved the IMF proposal, based on the Sri Lankan Government’s proposal, to reduce the pay-as-you-earn (PAYE) tax from next year, says Cabinet Spokesman Minister Bandula Gunawardena. He stated that the proposal will be presented with the next budget proposal in November this year.
A luxury house worth Rs. 100 million, located in Bambalapitiya, was forcibly seized by Galaboda Aththe Gnanasara Thero. The Colombo Additional Magistrate Pasan Amarasinghe, ordered Gnanasara Thero and two other respondents to immediately vacate the property, which had been unlawfully seized.
Sri Lanka’s State Minister of Finance Shehan Semasinghe says that the Cabinet of Minister has decided to allow the import of vehicles under several stages starting from October 01. He stated that restrictions on importing public transport vehicles will be removed from October 01, 2024 while the restrictions on importing commercial and goods transport vehicles will be lifted from December 01, 2024.
Major General Dinesh Nanayakkara of the Sri Lanka Sinha Regiment has been appointed as the new Chief of Staff of the Sri Lanka Army (SLA). He has been appointed to the position by the Commander of the Army, effective from September 16, 2024
The Supreme Court has directed the Controller General of Immigration and Emigration to appear before the court in person with regard to his failure to implement the order issued by the court over the electronic visa matter. The directive was issued by the Supreme Court after considering motions filed over the non-implementation of the interim order issued by the court regarding the issue.
Sri Lanka’s Hasitha Disssanayaka has won the Gold medal while Senura Hansaka won Silver in the Men’s Triple Jump event at the South Asian Junior Athletics Championships 2024 held in Chennai, India. Meanwhile, Sri Lanka has also secured the Gold medal in the Men’s 4x400m relay event.
September 14, Colombo (LNW): Showers or thundershowers are expected at times in the Western, Sabaragamuwa, and North-western provinces, as well as in the districts of Kandy, Nuwara-Eliya, Galle, and Matara. Fairly heavy showers, around 50 mm, are likely in certain areas of the Western and Sabaragamuwa provinces.
Additionally, showers or thundershowers may occur in Uva province and the districts of Ampara and Batticaloa during the evening or night.
Strong winds, ranging between 40-45 kmph, are forecasted over the Western slopes of the central hills, Northern, North-central, and North-western provinces, as well as in the districts of Hambantota, Monaragala, and Trincomalee.
The general public is advised to take precautions against temporary strong winds and lightning during thundershowers to minimize potential damages.
September 13, Colombo (LNW): Independent presidential candidate Ranil Wickremesinghe reflected on the significant changes Sri Lanka has experienced since the ‘aragalaya’ movement two years ago. He noted the collapse of political and economic structures during that period and the challenges the country faced in its aftermath.
Wickremesinghe acknowledged the inconvenience caused to the public following the ‘aragalaya’ and stressed the importance of safeguarding the country’s stability. He admitted to taking several measures, some of which were criticized for allegedly curtailing civic freedoms, but emphasized that his actions were within constitutional principles and aimed at preserving stability.
“Today, we enjoy freedom and elections,” Wickremesinghe stated, warning that without the steps he took, Sri Lanka could have faced a crisis similar to that of Bangladesh. He highlighted the necessity of maintaining a government, a framework, law and order, and stability to protect freedoms and fundamental rights.
Concluding his remarks, Wickremesinghe asserted that these elements have been successfully established, ensuring the country’s stability and safeguarding citizens’ rights.
