September 14, Colombo (LNW): The Maldivian government has downplayed concerns over its current financial struggles, characterising them as “temporary,” and dismissed the possibility of seeking a bailout from the International Monetary Fund (IMF).

Despite warnings of a potential sovereign default, the Indian Ocean nation, famed for its luxury resorts and celebrity visitors, insists it will navigate its fiscal challenges independently.

Speaking in Colombo, Foreign Minister Moosa Zameer reaffirmed the government’s strategy to tackle its debt obligations through tax reforms and restructuring state-owned enterprises.

“We have bilateral partners who are very sensitive to our needs and our situation,” Zameer remarked, adding that the Maldives is not in immediate talks with the IMF.

He attributed the financial strain to a “dip in reserves” but expressed confidence that the situation would improve with upcoming tax hikes and rationalisation efforts.

Accompanied by Finance Minister Mohamed Shafeeq, Zameer was in Sri Lanka for discussions with local central bank officials.

He emphasised that the Maldivian government is pressing forward with tax increases to meet its debt servicing obligations, anticipating that these fiscal adjustments would alleviate the current economic stress.

The Maldives counts China and India as its two largest bilateral lenders, with the nation’s foreign debt reaching $3.37 billion, roughly 45 per cent of its gross domestic product, in the first quarter of this year.

China holds approximately 20 per cent of this external debt, while India accounts for just under 18 per cent.

President Mohamed Muizzu, who assumed office a year ago, initially campaigned on reducing Indian military presence in the Maldives and strengthening ties with China.

Despite some initial “rough patches,” Zameer noted that the Maldives has since “cleared misunderstandings” with India, maintaining robust relationships with both China and India.

China has pledged further financial support following Muizzu’s ascent to power, with the President expressing gratitude for Beijing’s “selfless assistance” during his state visit shortly after taking office.

This commitment comes in the face of recent economic setbacks, including a Moody’s credit rating downgrade to Caa2, signalling high credit risk. In June, Fitch also downgraded the Maldives, citing declining foreign currency reserves and a mounting debt servicing burden of $409 million this year.

Despite these warnings, Zameer conveyed optimism that ongoing reforms and strategic partnerships would enable the Maldives to weather its current financial difficulties without external bailout interventions.

The Maldivian government’s stance suggests a focus on self-reliance and regional partnerships, aiming to stabilise the economy through domestic reforms and bilateral support rather than resorting to international financial aid.

September 14, Colombo (LNW): Prime Minister Dinesh Gunawardena has directed Agriculture and Plantation Industry Minister Mahinda Amaraweera and Trade, Commerce and Food Safety Minister Nalin Fernando to promptly ensure a guaranteed price for mung beans. This action comes as a highly successful mung bean harvest enters the market, the result of efforts by food security and economic regeneration committees to encourage farmers to grow the crop during the intermediate season.

District Secretaries have reported that wholesale prices for mung beans remain reasonable. However, with a larger volume of crops expected to flood the market in the coming weeks, the Prime Minister expressed concern that prices could drop, leaving farmers vulnerable.

In his letter, the Prime Minister emphasized the need for an immediate intervention to prevent a collapse in market prices and instructed the Ministries to hold discussions and announce a guaranteed price for mung beans as soon as possible.

September 14, Colombo (LNW): The National People’s Power (NPP) has firmly rejected recent media reports that implicated the Janatha Vimukthi Peramuna (JVP), a core partner of the NPP, in the recent altercation at the University of Sri Jayewardenepura.

The incident had led to the temporary closure of the university.

Former NPP MP Dr. Nalinda Jayatissa addressed the media, emphasising the party’s detachment from the situation.

“Various parties are attempting to pass the blame onto the NPP, to which we have no connection,” he stated, distancing the NPP from the allegations.

He suggested that these accusations reflect the growing unease amongst opposing factions ahead of the forthcoming Presidential Election.

“This is a clear sign of how opposition camps are agitated by their imminent loss in the upcoming election,” Dr. Jayatissa added, hinting at political motivations behind the allegations.

The situation at the university remains tense, with the administration having suspended all activities following the clash. Whilst some have pointed fingers at various groups for their alleged involvement, the NPP’s response indicates a broader narrative of political tension in the lead-up to the election.

September 14, Colombo (LNW): President Ranil Wickremesinghe has announced the establishment of the National Land Commission and the Truth and Reconciliation Commission (TRC) under his administration.

Speaking at a public gathering in Jaffna, the President revealed that Justice Nawaz would lead efforts within the TRC to address the longstanding issue of disappeared persons, aiming to bring closure to affected families over the next five years.

Emphasising the complexities in the Northern Province, President Wickremesinghe stressed that challenges in the region go beyond political concerns.

He underscored the critical need for development initiatives to prevent the northern areas from falling behind other provinces.

“If we focus solely on political solutions without addressing development, the north will continue to lag as other regions advance,” the President said.

This move signals a broader governmental approach to the issues facing the Northern Province. Whilst political reconciliation remains a priority, the President’s comments indicate an integrated strategy that also prioritises economic growth and infrastructure development.

The goal is to ensure that the northern regions are not isolated in terms of progress, aiming for a holistic uplift that encompasses both political and developmental dimensions.

The formation of the National Land Commission and TRC aligns with the government’s commitment to address historical grievances and promote unity. By tackling land-related issues and pursuing truth and reconciliation, the administration hopes to foster a sense of inclusivity and justice.

September 14, Colombo (LNW):President Ranil Wickremesinghe emphasized the critical importance of preventing power vacuums in the government, warning that such situations could lead to national disasters. Speaking at the “Doctors for a Healthy Future” meeting at Waters Edge Hotel, Battaramulla, he underscored the need for smooth transitions of power, drawing comparisons to Bangladesh’s current crisis, where a failure to fill a power vacuum has caused instability. He recalled Sri Lanka’s own close call in 2022 when he intervened to prevent a similar situation after President and Prime Minister Mahinda Rajapaksa resigned.

Addressing the doctors’ concerns, President Wickremesinghe expressed appreciation for their service during the nation’s challenging economic period. He affirmed his commitment to providing better salaries and benefits as the economy recovers, highlighting that both Sri Lanka’s economic and political systems have collapsed and require rebuilding. His “Puluwan – Sri Lanka” (Sri Lanka Can) program, he said, is focused on creating a new Sri Lanka by modernizing key sectors, including healthcare.

The President also discussed plans to introduce a comprehensive health services law that will encompass both public and private sectors, as well as modernize the century-old medical ordinance. In response to doctors’ concerns over salary disparities between the medical profession and the judiciary, he noted that reforms are being considered to address these issues.

Looking to the future, Wickremesinghe laid out his vision for an export-oriented economy, with the healthcare sector playing a key role by serving international patients. He also highlighted plans to modernize agriculture, alleviate rural poverty, and double tourism earnings as short-term strategies to boost the economy, with a long-term goal of achieving 7-8% GDP growth.

The President reiterated that maintaining stable power transitions is essential to Sri Lanka’s progress, stating, “Power must transition smoothly from one entity to another. If a vacuum is created, it leads to serious trouble.”

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.