Defining the Vision - The Debate

State Minister of Finance Shehan Semasinghe:  Representing President Ranil Wickremesinghe

The economy came to a complete standstill in 2022, mainly due to the lack of foreign currency, where we could not even purchase our basic needs required for daily life. The government embarked on an ambitious reform agenda. It was phased in threefold. One was to ensure that we address the foreign exchange crisis and eliminate shortages. Number two was to ensure we address the root causes of the crisis and the macroeconomic vulnerabilities. The third phase was to ensure policy stabilisation and ensure economic growth.

Phase one began in 2022 April. The immediate measures resulted in resolving the queues on fuel. The queues began to decline. The availability of essential food items improved and power cuts became much shorter. More importantly, fertiliser was made available.

Food production improved. Cash transfers to vulnerable communities and households were increased.
A major food crisis was averted, which everybody was predicting, as we rolled out our reforms. Increased remittances were received and the tourism sector had an increase in economic activities.

By early 2023, the queues were completely eliminated and we restored the electricity supplies without any power cuts. In our view, the plan was successfully completed.

Then the second phase was the most important to ensure stability and get the economy going forward. While doing that, the government as a policy did not ignore the fact of the fundamental causes of macroeconomic vulnerabilities and insight. A comprehensive macroeconomic reform programme was initiated to address these root causes. This was a primary requirement at that time.

We adopted a comprehensive fiscal reform, monetary policy reform, state-owned enterprises reform, financial sector reform, debt restructuring and then more importantly welfare programmes.

The primary budget deficit in 2021 was 5.7 percent of GDP, which was converted with this reform programme to a primary surplus of 0.6 percent of GDP in 2023. In the first six months of 2024, the primary surplus reached Rs.543 million. Inflation declined to 2.4 percent, from 70 percent. Food inflation, which was at 95 percent, reduced to 1.5 percent. The number of the taxpayers was increased from 437,000 to 1.15 million in 2023. Usable reserves were at US $ 20 million in April 2022. By the end of July 2024, the gross official reserves were increased to US $ 5.6 billion. The losses of the 52 important SOEs, which was at Rs.775 billion in 2022, was converted to a profit of Rs.456 billion in 2023.

The interest rates started declining from 30 percent to a single digit. The currency appreciated from approximately Rs.363-300. The Treasury cash balance was converted for an overdraft of Rs.832 billion in 2021, to a positive cash balance of Rs.552 million by the end of 2024.

As part of the reform programme and improvement in the economy, we also compare the pricing, which has declined significantly. Essential items, including fuel where the costs started coming down.

I think people expect more reductions to be done but it’s in a more systematic manner that we control the economy. Therefore, the market-driven economic concept will be very sure that the prices come further down with the confidence boost in it.

The more important factor in this entire reform programme was making sure that we look after the poor and vulnerable communities in Sri Lanka.

We do admit the fact that poverty levels have increased from 15 to 25 percent. That was as a result of the crisis we faced. One was covid and then the economic crisis.

We increased the cash transfers in a more scientific method. We are thankful to the World Bank, who assisted us in giving a cash transfer of Rs.15,000, from a level of Rs.4,500 to the poorest household in this country.

Apart from that the elderly citizens, citizens with disabilities, kidney patients, who needed support from the government, were also supported and their cash transfers were increased by 50 percent than what they got before. So, while we shape our economy, we ensure that we give the basic requirements that can be funded to any individual.

The more important factor is gaining the legislation that is required.

During the last two years, we emphasised the new laws and legislation passed in Parliament, mainly the Central Bank Act, Public Financial Management Act, Public Debt Management Act, Economic Transformation law, Parliamentary Budget Office and the amendment to the Banking Act. These were key legislation that were introduced to ensure fiscal discipline in Sri Lanka, apart from the measures taken to combat bribery and corruption.

We introduced new legislation with the assistance of the IMF, World Bank, ADB and other partners to combat bribery and corruption. I think that will have a significant result in the future and that is something that every citizen in Sri Lanka expects the government to do so.

We are on the right path and the economy is strengthening daily. We have gathered momentum on confidence of the economy. So, it is up to the people of Sri Lanka to decide whether they take this growth forward.

Opposition MP Dr. Harsha de Silva:  Representing main Opposition candidate Sajith Premadasa

Our model is a synthesis of economic freedom, the belief in markets and economic justice. The beliefs in equity and everybody gets a piece of the pie.

Let me detail out a 10-point plan existing of five pillars.

The first pillar is transparency and accountability. This is a necessary condition to move forward but it is not sufficient.

We will set the right legal framework, strengthen the CIABOC and key among plans is setting up an independent public prosecutor to take away the conflicts of interest between corruption, litigation and the office of attorney general.

On public procurement, we bring in the public procurement law, key procurement platforms, new laws for asset recovery and also importantly, better transparency in public finance management, including the bill test pass of the parliamentary budget office.

The second point is on stabilisation. We got four segments in this. First is debt crisis management. We will continue the negotiations if agreements are not signed by the 21st and at the same time engage with the IMF to amend certain terms and remain in the DSA parameters.

We don’t intend to shift those parameters but we plan to amend within those. Ensure financial system stability, while dealing with the NPL issues that we all face, loan revival units, parate issues with MSMEs, etc.

The second point is monetary exchange rates. Maintain the independence of the Central Bank. We are not going to change the legislation. We supported it. We will ensure that the report to Parliament as required but we will not interfere in setting interest rates.

However, we will keep in mind the need for international competitiveness by ensuring an appropriate real exchange rate. That’s what we actually require to be competitive.

Third is revenue consolidation. We agree on the need to increase revenue to 15.4 percent by 2047 to 2029 but how do we get there? It is by improving equity of taxation. Key here is digitalisation.

The RAM and the excise, all of those things we will be looking at very seriously to create a unified revenue authority.

We heard that the registration of taxpayers is about 1.1 million but there’s a lot of double counting. So, we need to ensure that people are registered, especially business professionals and expand the net and increase compliance.

There is one major proposal, that’s a middle-class tax cut. The tax-free threshold will remain.
However, the maximum marginal rate for the people will be 24 percent and the rich will have to pay 30-36 percent.
We are being responsible as we understand the repercussions of striking out taxpayers.

Moreover, several adjustments are proposed for corporate income tax for exporters. That is because of our ideology that we need to remove the anti-tradable bias in our economy.

We are also thinking about the minimum alternative tax and we will not remove the Simplified Value Added Taxes (SVAT). There are two SVATs, the suspended VAT and the simplified VAT. We believe that the suspended VAT makes sense and we will discuss it on how to actually implement the earlier SVAT or exporters and those providing services to exporters.

Fourth is expenditure control. This includes rationalising public expenditure, data driven, planning, transparency and accountability, leakage of cash transfers via digital mechanisms.

We prioritise infrastructure expenditure. We will complete the Kandy highway. But beyond that, we will have to see whether how much more highways. Light rail transit we will look at carefully.

Military spending also has to be rethought and any excesses will be moved to pay teachers.

In terms of SOE reforms, Suresh Shah will continue with the basic game plan of a holding company and then decide on the divesture based on national security issues and things of that nature. 

There’s going to be some increase in expenditure. Public sector salaries will increase but that will be based on the Presidential Commission and the Cabinet Commission on Salary Disparities.

We are not planning on moving away from that. We will keep the 24 percent and we will keep to the Rs.25,000. We assume it is possible because the Treasury has issued a statement that they can do it.

Maternity leave benefits and menstrual equity will be two things that we will be focusing on.

The third pillar will deal with incentivising growth. More from the 3 percent growth, we need to get a higher growth path. Post the IMF programme, if we go with the 10 percent rate, it will help us reach US $ 23,500 in the year 2027, which is a developed economy.

We want to unshackle the markets, reduce and remove interventions and increase productivity, which is a critically important factor for productivity.

Four areas are assigned for trade and investment policy reform. Here we talk about tariff rationalisation, export strategy, national single window and new EPC models in which we agree with the new legislation of private enterprise zones.

We are fully geared to modernising agriculture and removing the asymmetry in agriculture markets where the farmers don’t know what buyers want.

Breaking the rice mafia is another priority. The third area is industrial development connecting to global productive networks, production networks.

Our failure for decades is that we have been inward looking. This country, this economy, has a real structural problem of an anti-tradable bias.

Here the problem is breakdown of walls and building bridges. The fourth criterion focuses on areas such as IT and logistics and all the while paying attention to the MSME sector.

The fourth pillar is public sector management digitalisation. Our whole programme is based on a digital public infrastructure.

In terms of energy and utilities reforms, we agree with most of the new legislation but we can’t grandfather noncompetitive bids.

We will also focus majorly on renewable energy factor market reforms.

The last pillar is strong social safety net. This is key as seven million people are in poverty. Our team wants to create a model that is more like Janasawiya, where you don’t just roll-out money; you have to work for your money and that’s a 24-month programme. Until that is structured, we will continue with the Aswasuma but we plan to increase the first two lots from Rs.5000 and from Rs.8500 to Rs.10,000.

We will continue the path of recovery. We acknowledge the positives yet change to ensure the recovery does not come at an expense of our people’s survival. We will incentivise the tradable export growth in the long-term growth to permanently to lift Sri Lanka from the cycle of crisis by generating high growth.

Prof. Ranjith Bandara: Representing SLPP candidate Namal Rajapaksa

In our policy, there will be immediate relief packages and sustainable integrated growth strategy with four pillars and at the end, there will be an economy from Rs.90 billion to Rs.180 billion within 10 years.

We are looking at 7 percent annual average GDP growth with increasing per capita income from US $ 4,000 to US $ 8,000 over a period of 10 years.

Our proposal is based on the essence of the vision of the Mahinda Chinthanaya programme. The fundamental of this vision is timely revised, such as moderned, structured and innovated to address current issues and enhance the future prospects for the economy.

These are achievable outcome-oriented policy frameworks not fairy tales.

Let me answer a possible question as to why we have chosen the Mahinda Chintanaya, which was proven outcome-oriented, visible, sustainable and holistic.

What will be presented here will be presented in detail on September 2.

In brief, this will be in two components. One is the package of immediate relief and the other component is an integrated, sustainable economic growth plan.

The package of immediate relief is extensive, which includes relief such as food for all, relief for utility bills, affordable fertiliser, 100,000 jobs, financial empowerment of youth, strengthening Samudhi programmes, immediate tax relief, efficient public service, uninterrupted medicine supply, fast-tracking investment and also for the first time a state balance sheet, forensic audit where necessary and research for commercialisation.

The first pillar of this sustainable growth plan is a prioritising the state. We have to protect our national interests, economic sustainability.

That is why we propose efficient public service, mostly to support the other three pillars in our growth plan.
The second segment is innovation, where we have four main sections that are key to achieving state priorities such as national interest, economic growth, social progression and environmental sustainability. This particular pillar includes public sector optimisation, e-governance and no sales of public enterprises.

The third pillar is investment. We believe investment in four areas is essential to drive innovation and development, which are entrepreneurship, human resource enhancement, research and development for commercialisation and investment in infrastructure.

The fourth pillar is freedom. We believe four types of personal freedom are essential to upscale the development programme that we propose. This includes economic freedom, protecting political freedom, protecting cultural freedom and protecting religious freedom.

This policy framework is meant to address immediate issues that many of us facing right now.

We believe these things are doable by expanding the economy and improving the annual average growth rate.

Dr. Harshana Suriyapperuma: Representing NPP candidate Anura Kumara Dissanayake

I belive the Ceylon Chamber has had many sessions of this nature. We have listened to this type of stories with lot of graphs as to this is how development is going to be implemented but look at the results?

Implementation of (policies) is about the credibility of political leaders to deliver what they preach. If you look at the statements of the auditor general recently, it is mentioned that 75 percent of the corporate loans, borrowed by the government, amounting to Rs.8 trillion, went unaccounted for. 

It is a huge insult to the auditors of this country, yet we are here listening to a team who are answerable for that. 

One question I would like to ask the representatives of the private sector is that if you have managers and officers who have never delivered the budget, have overspent on their expenses, overloaded factories with staff and never deliver what they have promised, would you interview them again to ask what they are going to do within the next five years?

What would your employees, who look up to you, think of you? 

That’s why a change of culture is required in Sri Lanka.

In the recent years, the Central Bank printed an enormous amount of money. Which provision of the previous Central Bank Act prevented the monetary board to take an independent decision, if there were incompetent officials. Weren’t there any appointees who could say no to a minister?
When the government demands money, this is where the members of the Monetary Board can say no. Not to be overwhelmed or intimidated by the politicians. 

That is the change of culture. We need to look at that first. Not just by changing legislations.

We are state officials, who are able to stand up on our own for what we truly believe. Not to be lip servants to the politicians. 

Taking about the future of this country, I don’t even know how many of you (audience) came today in a Volkswagen made in Sri Lanka? 

In one angle, they are saying we need to bring an end to the menace of subsidies, whereas the same politicians are going distributing handouts to the people. Should we continue this political culture in Sri Lanka? 

We are saying we have no more queues. If you go and look at the visa queue yesterday, it’s a very different picture. Millions of Sri Lankans are trying to run away from this country. This is the country with failed policies and politicians have created, don’t we need to change that? 

A recent report by the Central Cultural Fund revealed several allegations of misappropriation. It has come to Parliament but where are outcomes? Is this the culture that we want to continue? 

When the head of the state, under the privileges of Parliament, is abusing the judiciary, where can we expect the rule of law? 

This is the change that we expect for Sri Lanka. This is the change people of Sri Lanka are asking for. That’s what the NPP is all about. It’s about the leadership. It’s about purpose-driven policies. It’s about a team with an unpledged track record to deliver with extra experience and expertise. 

It’s about clean politics, accountability, governance and transparency in our implementation.

It’s about rule of law that we are going to deliver. Allow businesses to ensure that they will have a level playing field and fairness in terms of conduct in terms of take by taking away impunity given to the politicians. This same law will be applied equally to them as well as to you.

It’s built on a bedrock of zero tolerance for corruption, not to rob the business opportunities that you have.

When the highest level of the country is tarnished and tainted with corruption, you cannot expect the ministers, Cabinet, secretaries, board of directors of the state institutions to say no to corruption. The government will play the role of a facilitator, provide the necessary resources for the businesses to grow to the full potential that they deserve to be.

These are opportunities that we will create. It will be through a wave of digitisation. We will bring resources together. We will connect entities, connect businesses, connect individuals, to take Sri Lanka forward. It will be like a creation through the production economy. We will connect Sri Lanka to global value chains, allow businesses to thrive to them to the best potential of and at the same time deal the social equity and inclusion.