7 March 2024 08:22 am Views - 75
By Ajith Siriwardana
Claiming that the discussions on the restructuring of domestic and foreign loans would reach a successful resolution soon, President Ranil Wickremesinghe said yesterday the government’s goal is to obtain temporary relief from debt defaults from 2023 to 2027.
Making a special statement in Parliament, he said the government’s plan is to diligently work towards repaying the loans in the period from 2027 to 2042.
“There are critics who question the economic progress we currently experience, attributing it to the temporary suspension of loan payments. They argue that once the debt is repaid, the nation will regress into a state of hardship. They describe the current situation as an interval in hell, suggesting that despite the apparent progress, underlying challenges remain unresolved. I’d like to underscore that the criticism lacks a factual basis.
Currently, we are actively engaged in discussions regarding the restructuring of all loans, including domestic and foreign loans. We are optimistic that these negotiations will reach a successful resolution soon. Our goal is to obtain temporary relief from debt defaults from 2023 to 2027. Subsequently, we plan to diligently work towards repaying the loans in the period from 2027 to 2042,” he said.
The President said through successful negotiations for debt restructuring, Sri Lanka aims to alleviate burden by reducing the annual foreign debt payments to 4.5% of the GDP, a substantial halving of the previous percentage.
“Sri Lanka faces a significant burden of debt. By 2022, the country was slated to repay approximately US$6 billion in foreign debt annually, amounting to about 9.5% of the GDP, a considerable strain for any nation. Through successful negotiations for debt restructuring, we aim to alleviate this burden by reducing the annual foreign debt payments to 4.5% of the GDP, a substantial halving of the previous percentage.
If the current trend of economic growth, as observed in 2022 and 2023, persists, we can anticipate maintaining a high percentage of state income. In such a scenario, servicing the debt would no longer pose a burden on the country. Currently, we have managed to elevate state revenue to nearly 11% of the Gross Domestic Product (GDP). This increase necessitated the imposition of Value Added Tax (VAT),” he added.
The President added that the implementation of VAT has bolstered the government’s revenue, demonstrating to the international community Sri Lanka’s capacity to repay the debt with the increase in government revenues and the revival of the economy, the rupee has strengthened.
“The tax network will be expanded, with the total number of tax files surging to over 1 million in 2023, marking a 130% increase. The practice of printing money has been completely halted,” he said.
He also said the government aims to exempt items such as books, school equipment, health equipment, and medicine from the VAT list to continue reducing the VAT rate.
“We’ve suspended the Parate law for business establishments and offered relief on electricity bills this week,”he said.