ECONOMYNEXT – Sri Lanka will announce its debt restructuring strategy within the month of May, according to State Minister of Finance Ranjith Siyambalapitya who said the government also intends to bring down taxes and decrease debt to GDP in the coming years.
Speaking to reporters Thursday May 04 morning, Siymabalapitiya said the government plans to gradually reduce newly increased taxes over the next five years once revenue targets have been met upon further expansion of the tax base.
“Today our debt burden is 128 percent of gross domestic product (GDP). We expect to bring this down to 95 percent in the next few years.
“It is clear that we’re moving forward with a plan to lower the debt and tax burdens,” he said.
A few more “difficult” targets have yet to be met, said Siyambalapitiya.
“The journey we embarked on was not an easy one, nor was it a popular one. My belief is that it’s best to move ahead with these victories with modesty,” he added.
The Central Bank had previously said it would announce a debt restructuring strategy in April. Asked to comment on the delay, the state minister said a strategy is being formulated and will be presented within the month.
“Let’s see what happens,” he added.
A senior IMF official said on Wednesday that Sri Lanka can be put on the path to prosperity if it achieves debt sustainability, adding that the island nation must also confront the challenge of restructuring domestic debt without hurting financial stability.
Sri Lanka can prosper if it achieves debt sustainability: IMF official
The recent IMF-backed hike in progressive personal income tax in Sri Lanka was met with resistance from a minority of the working population that earns more than most Sri Lankans but are well-organised and are backed by the country’s leftist and left-leaning parties.
The IMF has highlighted tax cuts that were introduced soon after the election of then President Gotabaya Rajapaksa in late 2019 as contributing to Sri Lanka’s crisis situation.
Meanwhile, Foreign Minister Ali Sabry told Channel News Asia on Wednesday that the government is optimistic (“fingers crossed”) that the South Asian nation, still recovering from its worst currency crisis in decades, is on track to completing its debt restructuring programme before the IMF reviews its programme in September.
“We’re confident that just like we managed to secure debt restructuring assurances from our friend and creditors, we should be able to restructure it,” said Sabry.
(Colombo/Mar04/2023)