Sri Lanka seeks temporary relief from debt defaults till 2027
Sri Lanka has sought temporary relief from debt defaults from 2023 till 2027, President Ranil Wickremesinghe told Parliament, Wednesday.
He said that Sri Lanka plans to diligently work towards repaying the loans in the period from 2027 to 2042.
“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,” the President said.
The President also said that the practice of printing money has been completely halted.
He said that if the current trend of economic growth, as observed in 2022 and 2023, persists, Sri Lanka can anticipate maintaining a high percentage of state income.
In such a scenario, the President said that 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). Undoubtedly, this decision was a bitter and challenging one. We made the decision to implement such a tax with great reluctance. However, considering the economic ailment we face, there are no other viable options. We must endure this temporary pain for the greater good. The implementation of VAT has bolstered the government’s revenue, demonstrating to the international community our capacity to repay the debt,” he said.
The President also said that with the increase in Government revenues and the revival of the economy, the rupee has strengthened.
The strengthening of the rupee has led to a decrease in the prices of imported goods, including fuel. As a result, all VAT-paying companies are now reaping the benefits of the stronger rupee, which extends to the entire country. Furthermore, we anticipate additional benefits in the future.
“So, if we continue our current trajectory with the same vigour, our economy will be in significantly better shape by the end of this year. Additionally, we’ve ceased the practice of using taxpayers’ money to cover the losses of government institutions. Instead, we’re restructuring these institutions and transferring them to investors,” he said.
The President also said that the tax network will be expanded, with the total number of tax files surging to over 1 million in 2023, marking a 130% increase. (Colombo Gazette)
