President confident Sri Lanka can emerge from bankruptcy by 2026

President Ranil Wickremesinghe, delivering the government’s policy statement in parliament today, said he is ready to make politically unpopular decisions, such as introducing new tax policies, to put the country back on track.

“I am not here to be popular. I am ready to make unpopular decisions for the sake of the country. People will realize the importance of these decisions in two to three years.”

The Head of State, who arrived in Parliament earlier this morning, inaugurated the Fourth Session of the Ninth Parliament at 10:00 a.m. After he delivered the government’s policy statement, the parliament was adjourned until 9.30 a.m. tomorrow (Feb. 09).

Mentioning that due to the excessive tax reliefs granted in late 2019, tax revenue dropped drastically, the President pointed out that those who issued a clarion call for tax policy revision are now taking issue with it.

“As at December 31, 2019, a total of 1.6 million businesses, companies, and individuals were paying taxes. But the number of tax payers dropped to 500,000 by December 2021 leading to a decline in the government tax revenue to an all-time low.”

Some people are urging the government to increase the income tax threshold from Rs. 100,000 to Rs. 200,000, while some want the PAYE tax abolished, the President continued, explaining that the country will incur a loss of Rs. 100 billion if the PAYE tax is scrapped. If the income tax threshold is brought down to Rs. 200,000, the economy will lose Rs. 63 billion. The country cannot afford to lose income tax revenue to the tune of Rs. 163 billion, he added.

In his policy statement, the President highlighted the importance of taking necessary action to rectify the tax divergence noting that in comparison to the other countries in the world, Sri Lanka’s direct taxes are low. “All Sri Lankans pay huge sums of money as indirect taxes. In other countries, most of the taxes are collected from a higher income bracket [...] The situation in our country is different. In 2021, our direct tax was 21% while indirect was 79%. We should take action to rectify this tax divergence.”

President Wickremesinghe also appreciated the migrant workers for being extremely supportive of the motherland at this critical juncture. “By the end of 2022, workers’ remittances reached USD 4 billion in foreign exchange.”

Entrepreneurs and migrant workers made this commitment in the context of political parties and groups influencing them on diverse fronts, proving that they increase export revenues and remit money to Sri Lanka not because of a political party in power but for the sake of the country, the President said further. “All of them deserve our respect.”

He said the government envisions bringing new laws pertaining to the implementation of powers of Provincial Councils in the fields of education and health as it is alleged that due to certain practices of the Central Government, the powers of the Provincial Councils have been reduced in these two sectors.

Despite being challenged with difficulties, the Head of State said the government has taken measures to protect the vulnerable groups suffering due to the economic crisis. Meanwhile, preparations are afoot to implement a program to finance them directly through a welfare bank account.

“The welfare system in our country is distorted. Even those with higher incomes are subsidized. We are taking measures to change this situation,” President said further, pledging to identify those in absolute poverty and to finance them through a welfare bank account.

President Wickremesinghe, who noted that he would never promise what cannot be delivered, said he is currently implementing all the pledges given in his budget speech, adding that Sri Lanka is now moving from a negative economy towards a positive one. “It is clear to many that the future cannot be built on falsehood.”

He also expressed confidence that by the end of 2023, Sri Lanka can achieve economic growth, stating that the country is now moving from a negative economy towards a positive one. 

The Head of State, who is hopeful that Sri Lanka can rise out of bankruptcy by 2026, said the country would be able to extricate from this crisis even earlier if all the parties in the parliament join the rebuilding process.

Speaking on the government’s efforts to revive tourism sector hit hard by the 2019 Easter Sunday attacks, Covid-19 pandemic outbreak and the economic crisis, President Wickremesinghe said tourist arrivals saw a record high in January this year even in the midst of street protests. He also mentioned that Sri Lanka managed to rank among the top 10 tourist destinations in the world despite the ongoing crisis situation.

With regard to the IMF bailout plan of USD 2.9 billion for Sri Lanka, the President said the government has reached the final stage of negotiations with the global lender. Speaking on the financial assurances from Sri Lanka’s creditors, he mentioned the positive affirmations received from China, India and Paris Club to restructure the island’s debt.

President Wickremesinghe went on to assure that the government is taking steps to put more weight on developing the North and the East, adding that a general plan is being implemented in this regard.

“A separate plan is being implemented for the development of the North, which was the most damaged due to the conflict. Malwatu Oya development project will be commenced. Necessary measures will be taken for the river and water management in the Eastern Province, restoration of Vadamarachchi lake and lagoon, and accordingly, which will provide water for drinking and agricultural purposes. The electricity requirement in these areas is expected to be generated through renewable energy. Solar and green hydrogen power are also used for this purpose.”

He also stated that special attention is being paid to the Upcountry Tamil community, who were first brought to Sri Lanka 200 years ago, to develop plantation industry in Sri Lanka.

While reiterating that there will be no division of the country, the President noted that the government expects to devolve power within a Unitary State. “I don’t have a political group in this Parliament. The Party I represent has only one MP. However, as the President, I do not represent that Party. I represent the entire nation. Therefore, I do not engage in party politics.”

He vowed to take steps to streamline and expedite the process of tracing missing persons, adding that the mechanism of the Office on Missing Persons would be strengthened.

The attention of the government has also been focused on the people who have been imprisoned for being involved in terrorist activities, President said further in his policy statement. “They have been imprisoned for many years without trial. We are taking measures to systematically release these prisoners.”

Recalling the peak of the crisis situation last year during which severe shortages of essential items, long queues for domestic gas and fuel and daily power cuts of more than 10 hours were experienced, the President said the pressure people felt back then is now eased as a result of the measures taken in the recent past.

Noting that the country’s economic stability has been restored to a certain extent, he said, however, this journey, which is yet to come to an end, has not been easy. President Wickremesinghe reiterated that the government has been able to safely guide the country a long way across a challenging course.

While urging everyone to keep working to steer the country towards a brighter future, President Wickremesinghe underscored that it is the responsibility of every citizen to build a country where the children can live freely.