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Tuesday February 27th, 2024

Sri Lanka state minister defends salary hike proposal amid revenue shortfall concerns

ECONOMYNEXT — State Minister of Finance Ranjith Siyambalapitiya has defended a proposal to increase salaries of cashs-strapped Sri Lanka’s bloated state sector, calling it a “courageous” decision by the president, amid concerns over revenue shortfalls.

“It was a very courageous statement by the president at the last cabinet meeting, because, one year ago, this was a country that was unable to pay salaries,” said Siyambalapitiya.

The state minister said Sri Lanka needs 90 to 95 billion rupees a month to finance the state salary bill, with another 15 billion needed to cover pensions.

“A year ago, this was a country that was unable to raise those funds. A country that was compelled to pay salaries in two installments.

“In a country that was in such a state, the leader has communicated clearly that he will increase state sector salaries. The way I see it, it is a difficult thing. But a leader must have that courage,” said Siyambalapitiya.

“We’re now doing the math. There are 1.4 million workers and 600,000 pensioners — a total of 2 million. If you increase salaries by 1,000 rupees, you need 2 billoin,” he added.

The state minister said Sri Lanka must rise again from last year’s crisis.

“In sports, you have to make it to the finish line. This is a time in which we as a country must adopt thinking,” he said.

The state minister’s optimism notwithstanding, concerns have been raised by some quarters over the proposed salary increase for state sector workers in the face of an ambitious 2.3-percent primary surplus target.

Meanwhile, President Ranil Wickremesinghe last week defended a proposed 3 percent hike in value added tax (VAT), amid confusion over how the government would finance the proposed salary increase.

He said the VAT hike was required for economic stability.

Speaking at the National Industry Excellence Awards 2023 on Wednesday November 01 in Colombo, Wickremesinghe acknowledged that the decision to increase VAT was a challenging one, driven by the “need to maintain economic stability”.

“To ensure our financial stability in the coming year, we must significantly boost our income. We have set specific revenue targets that we must work diligently to achieve. It’s crucial for the country’s progress and to prevent bankruptcy in the near future,” he said.

“As a result of these financial constraints, we had to make the difficult decision to raise the VAT to 18 percent yesterday. This step aligns us with the practices of countries like India and Pakistan. Such decisions are never easy for any government. However, failing to take these measures would cast a shadow on everyone’s future. Therefore, making the right choices becomes imperative,” he added.

Opposition leader Sajith Premadasa in a discussion with university lecturers on Wednesday claimed that the proposal to increase VAT by 18 percent in 2024 was a distortion of Sri Lanka’s tax formula.

The public, particularly the working and underprivileged classes, will have to bear the burden of this “regressive” tax hike, he said.

The salary hike for state sector workers is to be proposed in the upcoming budget for 2024, with President Wickremesinghe also promising to request the private sector to increase salaries of employees following an unprecedented rise in commodity prices due to inflation triggered by 2022’s currency crisis.

There is also an ongoing campaign of agitation by state sector unions demanding a 20,000-rupee salary increase. Government spokespersons have not provided specifics on the salary increased that will be proposed in the budget.

Meanwhile, Sri Lanka’s deal with the International Monetary Fund (IMF) includes an agreement to achieve a primary surplus of 2.3 percent of the gross domestic product (GDP) by 2025.

It is against this backdrop that President Wickremesinghe’s administration has increased personal income tax and now also plans to hike VAT by a significant margin, despite protests from unions and increased levels of migration. (Colombo/Nov07/2023)

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Sri Lanka halts auction of bank loan collateral till Dec 15

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers had approved a proposal by President Ranil Wickremesinghe to amend the country’s loan recovery law and halt auctioning of defaulted loans till December 15, Minister Bandula Gunawardena said.

“Various parties have pointed out issues existing in paying off the loans obtained by small and medium scale businessmen from banks,” Gunawardena said Tuesday.

“Therefore, it is apparent that a sufficient grace period to pay off relevant debts without being a burden to the banking system should be allowed.”

“Accordingly, the Cabinet of Ministers granted approval … to suspend the procedure by the banks to acquire properties of loans not paid off, until 15 December 2024, and to amend Section 4 of the Recovery of Loans by Banks (Special Provisions) Act No, 4 of 1990 to impose legal provisions required for the above.” (Colombo/Feb27/2024)

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Sri Lanka parliamentary committee says electricity tariffs should be reduced by 20 pct

ECONOMYNEXT — A parliamentary Sectoral Oversight Committee on Alleviating the Impact of the Economic Crisis has recommended to the Public Utilities Commission of Sri Lanka (PUCSL) that electricity tariffs be reduced by at least 20 percent.

A statement from parliament said on Monday February 26 that, following an analytical review of the figures presented by the Electricity Board, Public Utilities Commission, etc. and taking into consideration all other factors affecting the price of electricity, including considering the opinion given by experts that the existing electricity price can be reduced by about 33%, price of electricity should be reduced by at least 20% in the year 2024 so that the state-run Ceylon Electricity Board (CEB) will not suffer any loss.

PUCSL officials have informed the Committee that by the end of this month, they can submit the necessary recommendations to reduce the electricity bill, according to the statement.

The matter was taken up for discussion when the committee, chaired by MP Gamini Waleboda, met in the Parliament on February 22.

Officials from the Ministry of Industry, Ministry of Finance, Central Bank of Sri Lanka, Public Utilities Commission, Industry Development Board, Enterprise Development Authority, Department of Population and Statistics, Department of Inland Revenue and from government institutions including the Micro, Small and Medium Scale Industries Board and a group of industrialists had also been called for the meeting.

“The Committee gave several directives to the relevant institutions and officials to identify the micro, small and medium scale industries that are directly affected by the economic crisis and to activate the local economy and increase the foreign exchange earnings by reviving the industry sector.

“The Committee pointed out that due to the increase in electricity bills, the number of electricity connection cuts reported across the island has exceeded one million. It was also emphasised that in order to alleviate the pressure on the industry and the society, it should be arranged to provide electricity connections again by charging only 50 percent of the outstanding charges at the initial stage with the concessional basis of payment of outstanding electricity charges on installment basis,” the statement said.

The committee was also of the view to allow the customer to pay the connection fee in installments so as to avoid discouraging new entrepreneurs to start micro, small and financial industries due to high charges for getting fixed electricity connection and instructed to review the new connection fee and work to reduce it as much as possible.

The committee chair has instructed the PUCSL to conduct an audit on the electricity consumption in the public sector as an approach to ensure energy security.

“The Committee recommended to the Ministry of Finance and the Central Bank to start a loan scheme at subsidised interest for the purchase of solar panel systems with a view to promoting solar energy as a source of energy supply to industries. The Ministry of Finance expressed its agreement to provide refinancing facilities subject to a maximum as per the proposal made by the Committee to implement a loan scheme targeting micro, small and medium scale industrialists under subsidized interest rates.

The committee has also recommended that raw materials that must be imported from abroad and impose tax concessions on such raw materials be identified to ensure the supply of raw materials required for the smooth running of micro, small and medium scale industries. Copper, lead, aluminum and other industrial scraps used as raw materials in various domestic industries currently being sold by the CEB to external buyers and other entities should also be issued to micro, small and medium scale industrialists recommended by the Ministry of Industry and the Industrial Development Board, the committee has recommended.

The definition used by the Department of Population and Statistics for micro, small and medium industries and the definition used by other institutions such as the Industrial Development Board and the Central Bank for those industries are different from each other, which is an obstacle in making policy decisions, the committee had noted, directing the Department of Population and Statistics to support to the policymakers by releasing statistical data based on a common definition.

“The committee also recommended that the Credit Information Bureau should take prompt action to remove their credit information from the blacklists so as to facilitate access to credit facilities for micro, small and medium scale industries facing financial crisis to activate their balance sheets and to review all existing laws and procedures for registration of micro, small and medium scale industries as well as to obtain licenses and introduce a simple system.

“The committee informed all the parties to establish a steering Committee headed by the Ministry of Industry to implement the recommendations given by the Committee and to report its progress within a week,” the statement said. (Colombo/Feb27/2024)

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Sri Lanka sets up fund to help children of Gaza

The United Nations Relief and Works Agency for Palestine Refugees in the Near East is mandated to provide education, health, relief and social services, and emergency assistance to refugees. (Pic courtesy UNWRA)

ECONOMYNEXT – Sri Lanka’s cabinet of ministers have approved a proposal by President Ranil Wickremesinghe to set up a fund to help children caught in the war in Gaza, a statement said.

The government will contribute a million US dollars and use funds allocated by state agencies for Ifthar celebrations.

Public contributions are also called.

The Presidential Secretariat is requesting public donations citizens for the “Children of Gaza Fund” to be contributed to account number 7040016 at Bank of Ceylon (7010), Taprobane Branch (747) by 11th April.

Deposit receipts should to be forwarded to 0779730396 via WhatsApp. (Colombo/Feb27/2024)

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