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Finance Minister Shehan Semasinghe stressed that if the opposition candidate’s promises were fulfilled, the country would immediately lose the IMF program. He also warned that agreements with foreign debt holders and private bondholders would be threatened, leading to a serious economic crisis.
State Minister Seemasinghe made the remarks at a press conference held at President Ranil Wickremesinghe’s political office on Flower Road in Colombo on Thursday (29th).
He noted that discussions are underway with the International Monetary Fund to amend the PAYE withholding tax law to reduce the burden on the public, and he expects the tax cuts to be implemented in April 2025 after the relevant agreements are finalized.
Deputy Finance Minister Shehan Semasinghe stressed that any violation of the International Monetary Fund (IMF) agreement would immediately jeopardize the country’s access to IMF programs. He warned that if the opposition candidate’s promises were fulfilled, it could result in the country losing the IMF program.
Minister Seemasinghe further warned that such actions could undermine agreements with foreign creditors and private bondholders, putting the country at risk of a serious crisis. He made these remarks at a press conference at President Ranil Wickremesinghe’s Political Office on Flower Road in Colombo on Thursday (29th).
The Minister of State also mentioned that he is currently discussing with the International Monetary Fund to revise tax policy, which aims to provide relief to citizens by adjusting income tax.
The goal is to implement these tax cuts by April 2025, once the deal is finalized.
At the press conference, Seemasinghe highlighted President Ranil Wickremesinghe’s recently released presidential manifesto titled “Five Years of Victory in Sri Lanka under Ranil” and praised President Wickremesinghe for transforming the country from the brink of economic collapse to a more stable and livable country, noting that no other leader was willing or able to take on this challenge.
The policy statement, “Five Great Years of Ranil’s Sri Lanka”, focuses on consolidating the economic stability that has been achieved. Seemasinghe urged the public to decide on September 21 whether to continue with the plan and further enhance its benefits.
At present, the most pressing issue in our country is the economy. Although different parties have proposed different economic strategies, it seems that
How feasible are these proposals? Over the past two years, many people, including President Ranil Wickremesinghe, have worked tirelessly to rebuild this country’s collapsed economy. Those who have ridiculed our efforts and hoped we would fail should now consider whether their current commitments to the public are truly ethical.
The benefits of the economic stability we have achieved are trickling down to the people. The President has consistently stressed that when the economy strengthens, some of the funds should be reinvested to further strengthen its resilience, while others should be used to mitigate the impact of reform programs on the public.
In line with this approach, the President has appointed a committee to address the wage increase in the civil service and eliminate the wage gap. Based on the committee’s recommendations, the minimum wage for civil servants will be raised to Rs 55,000 starting next year. As we move forward, we have set major goals,
This includes ensuring that the primary budget balance remains positive. However, it is worrying that some political parties have suggested in their proposals to modify the IMF program.
However, I must responsibly point out that if the opposition’s promises are fulfilled, instead of following President Ranil Wickremesinghe’s plan, the country will lose the IMF program when it comes to implementing the program. The reason is that we have to maintain the budget deficit at 5.2% of GDP. However, if the opposition’s promises are fulfilled, the budget deficit will swell to 11.9% of GDP. In addition, maintaining a positive primary account balance of 2.3% is a key goal of our program. However, if the opposition’s promises are fulfilled, this balance will plummet from positive 2.3% to negative 4.3%, making it impossible to continue with the IMF program.
As a result, our country would lose the program with the IMF, as well as the agreements we have with our creditors and private bondholders. It would therefore be irresponsible to make commitments without taking into account these technical realities. Furthermore, it is important to understand that decisions to negotiate with organizations such as the IMF cannot be made overnight; they require time and careful consideration.
The President has also prioritized providing concessions to private sector taxpayers. In this regard, we started negotiations with the IMF in September 2023. As a result, the current income tax exemption limit of Rs 1.2 million per year will remain unchanged, and the threshold of Rs 5 lakh will be raised to Rs 7.2 lakh. These tax cuts are expected to be implemented from April 2025.
A common question we face is how the government plans to make up for the revenue lost from these tax cuts. We have reached an agreement with the IMF to fill this gap, ensuring that no additional burden is imposed on existing taxes or new taxes are introduced. This tax reform is being implemented gradually, without duplication, and is a sustainable adjustment.
In addition, some people claim that the tax department has around Rs 1,000 billion in unpaid taxes which have not been properly collected. However, it is worth noting that Rs 868 billion of these tax appeals have been filed. As of 2023, the tax arrears are Rs 188 billion and in the first half of 2024, we have successfully recovered Rs 104 billion of these arrears.
Our reform plan not only reduces the burden on taxpayers, but also improves the efficiency of tax administration.
We have also implemented a formal system called “Aswesuma” to provide relief to the poor and vulnerable in our country. Through this scheme, extremely poor families are provided with a monthly stipend of Rs. 15,000. The government has allocated Rs. 205 billion to support 2.4 million families in three categories. Currently, 1.8 million families are benefiting from the scheme and the distribution process is free from political interference.
In addition, we are working to gradually relax the current restrictions on automobile imports. We will prioritize relaxing restrictions on cars that make a significant contribution to economic activity and meet public needs. Subsequently, we will relax restrictions on private car imports. This process must be carried out systematically.
We have successfully increased our foreign exchange reserves from $20 million to $5.6 billion in 2022. During this period, we have continued to service our debt. While we have temporarily stopped repayments on bilateral loans, we continue to service multilateral loans and other selected debts. It is critical that these actions are taken in a way that ensures that our foreign exchange reserves remain stable, as we did in 2022.
Ali Sabri, Minister of Foreign Affairs, Justice, Prison Affairs and Constitutional Reform, also spoke.
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